Moody’s drops Envision loan, rates new loan B1

Moody's Investors Service said it rated Envision Healthcare Corp.’s proposed $750 million senior secured term loan due 2022 B1 and lowered the rating on the existing $1.28 billion senior secured term loan due 2018 to B1 from Ba3.

Envision's B1 corporate family rating, B1-PD probability of default rating, B3 senior notes rating and SGL-1 speculative grade liquidity rating were all affirmed.

The outlook is stable.

Proceeds from the new term loan are being used to fund the $620 million acquisition of Rural/Metro announced on July 30, repay $114 million of revolver borrowings and pay transaction fees and expenses.

Moody’s said the downgrade of the term loan reflects the increase in the amount of secured debt in the company’s capital structure. Previously, the unsecured notes provided loss absorption to the secured loans sufficient to warrant a rating of one notch higher than the corporate family rating in accordance with Moody's loss given default methodology.

The increase in senior secured debt has now diluted this loss absorption benefit. Hence the downgrade of the existing term loan reflects a change in the seniority profile of the company's debt structure. It does not reflect any fundamental deterioration in Envision's credit strength, the agency said.

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