S&P downgrades ExamWorks

S&P said it lowered the corporate credit rating on ExamWorks Group Inc. to B from B+ and removed it from CreditWatch, where it was placed with negative implications in April.

The outlook is stable.

The agency also said it assigned a B rating and 3 recovery rating to the company’s proposed $150 million revolving credit facility and $770 million first-lien term loan.

The 3 recovery rating indicates 50% to 70% expected default recovery.

S&P also said it assigned a CCC+ rating and 6 recovery rating to the company’s proposed $340 million second-lien notes. The 6 recovery rating indicates 0 to 10% expected default recovery.

ExamWorks recently announced that it will be acquired by Leonard Green & Partners LP for $2.2 billion in a leveraged buyout.

The downgrade reflects the increase in leverage to 7.5x from 3.9x because of the leveraged buyout, S&P said.

Despite an expected positive cash generation of $40 million to $50 million through 2017, the agency said it expects the company’s financial policy will be aggressive.

S&P said it believes the company will now use its cash flows in favor of shareholder returns rather than permanent debt reduction.

The ratings also reflect the company’s narrow focus on a niche business and its exposure to regulatory changes, the agency added.

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