S&P trims WellPath

S&P said it lowered its ratings for WellPath Holdings Inc. and its first-lien term loan to CCC+ from B- and second-lien term loan to CCC- from CCC. The 3 recovery rating on the secured debt is unchanged, indicating meaningful (50%-70%; rounded estimate: 55%) recovery prospects. The 6 recovery rating on the second-lien debt indicates negligible (0%-10%; rounded estimate: 0%) recovery in default.

“WellPath's liquidity will be constrained over the next 12 months, and it may face refinancing risk. As of Sept. 30, 2022, WellPath had about $23 million cash on hand. We expect a free cash flow deficit and that the company had about $17 million of deferred payroll taxes due in January 2023. The company has a $65 million revolver (undrawn) that matures in about six months in October 2023.

“With persistent free cash flow deficits estimated for the next 12 months, and a challenging operating and macro environment, we believe WellPath may struggle to refinance the revolver due in October 2023 and $500 million first-lien term loan due in October 2025,” S&P said in a press release.

The outlook is negative.

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