Moody's downgrades Genesis

Moody's Investors Service said it downgraded FC-GEN Operations Investment, LLC's corporate family rating to B3 from B2, its probability of default rating to B3-PD from B2-PD and the $238 million senior secured term loan due 2018 of subsidiary Genesis HealthCare LLC to B3 (LGD3, 45%) from B2 (LGD3, 44%). The outlook is stable.

The agency said the downgrade reflects lower EBITDA and cash flow due to reimbursement reductions and weaker-than-expected performance over the past nine months, which has resulted in a very high ratio of debt to EBITDA at 8.6 times.

In addition, the downgrade reflects Moody's concern related to the minimal cushion under the company's bank financial covenants and Moody's expectation that a waiver or an amendment may be required over the near term.

The ratings are supported by the considerable scale Genesis has as one of the largest providers of post-acute care services and its good geographic diversification in skilled nursing facilities, the agency said.

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