Moody's downgrades Upstream Newco

Moody's Investors Service said it downgraded Upstream Newco, Inc.'s ratings, including the rating on the first-lien senior secured credit facility to B3 from B2, the rating on the second-lien term loan to Caa3 from Caa2, the corporate family rating to Caa1 from B3 and the probability of default rating to Caa1-PD from B3-PD.

“The ratings downgrade reflects weak liquidity and a slower pace of deleveraging. Cash flows have been weak, with notable cash burn in the fourth quarter. This was largely due to weaker operating cash flows and continued investments to open new clinics, but also minority interest buybacks.

“To shore up liquidity, Upstream received an incremental equity investment from existing investors in the fourth quarter of 2022. Upstream started 2023 with sequentially stronger performance in the first quarter. However, Moody's expects pressure on cash flows to persist over the next 12-18 months, with slightly positive free cash flow. Leverage was 8.1x at March 31, 2023. Moody's expects leverage to trend lower at a moderate pace, but remain above 7x over the next 12-18 months,” the agency said in a press release.

The outlook remains stable.

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