Moody's may lower Rotech

Moody's Investors Service said it placed the ratings of Rotech Healthcare, Inc. under review for possible downgrade, including its $275 million senior secured credit facilities due 2008 at Ba2, $300 million senior subordinated notes due 2012 at B2 and corporate family rating at Ba3.

The review is due to the company's shift in strategy toward using operating cash flow to acquire several small competitors instead of reducing debt, a significant increase in capital expenditures, contracting margins, lower operating cash flow and a decline in administrative fees paid by Medicare for inhalation drugs in 2006, Moody's said.

Moody's also said the company's existing credit facility was amended Nov. 8 with several beneficial changes to its financial covenants. Prior to the amendment to the credit facility, there was a risk that the Rotech would not have been compliant with covenants as set forth in its credit agreement, which could have resulted in a technical default, Moody's said.

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