Moody's upgrades EMSC Management

Moody's Investors Service said it upgraded the corporate family and probability-of-default ratings of co-issuers EMSC Management, Inc. and EmCare HoldCo Inc. to B1 from B2 and affirmed the SGL-2 speculative grade liquidity rating, B3 $250 million 10% senior subordinated notes due 2015 (LGD5, 77%) and Ba2 $450 million senior secured credit facilities (LGD2, 20%), which include a $100 million senior secured revolving credit facility due 2011 and a $350 million senior secured term loan B facility due 2012.

The outlook was changed to positive from stable.

The co-issuers are operated through a holding company, Emergency Medical Services LP, which is in turn owned by Emergency Medical Services Corp.

The agency said the upgrade primarily reflects EMSC Management's record of strong cash flow generation, a material improvement in balance sheet and cash flow leverage and a solid and improving track record as a standalone operation notwithstanding the uncertain reimbursement environment for emergency medical services providers. Other factors that support the ratings are the company's leading market shares in both of the markets that it serves, its strong customer and geographic diversification, a stable and recurring revenue base, strong underlying industry demand dynamics, the company's solid commitment to information technology investment to differentiate its service and reduce its cost base and solid employee retention experience.

Factors that depress the company's ratings include weak margins, reimbursement risk with respect to physician fee payments during 2007 and beyond, collection risk due to a high percentage of uninsured patients served, the high concentration of compensation and benefits as a percentage of total costs and the unionized nature of the company's workforce, Fitch said.

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