Moody's changes Envision outlook to stable

Moody's Investors Service said it changed Envision Healthcare Corp.'s outlook to stable from positive and affirmed the company’s corporate family rating at B1, probability of default rating at B1-PD, senior secured term loan due 2018 at Ba3 (LGD3), senior notes due 2022 at B3 (LGD5) and speculative grade liquidity rating at SGL-1.

The rating actions follow the company's announcement that it agreed to acquire Rural/Metro Corp., a provider of emergency and non-emergency ambulance transportation and specialty fire protection services, for $620 million.

The agency said the change in the outlook reflects both the large size of the Rural/Metro acquisition and the incremental debt required to effect the transaction, including the almost $500 million of acquisitions completed in first quarter of 2015. Moody's estimates that the pro forma ratio of debt to EBITDA could rise to 4.3 times for the last 12 months ended June 30 if the acquisition is fully debt funded, and the agency anticipates that debt reduction will be limited over the next 12 months.

If the transaction is funded with secured debt, the agency plans to downgrade the company's existing term loan to B1.

Moody’s said the B1 corporate family rating reflects Envision's solid credit metrics and the considerable scale and geographic diversification in its two primary segments, physician staffing and medical transport, which are otherwise very fragmented among other providers.

The rating reflects Moody' concerns with the high level of government reimbursement and the company's aggressive acquisition strategy.

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