Moody's rates FHC loans B1, B3

Moody's Investors Service said it confirmed the B2 corporate family rating of FHC Health Systems, Inc., concluding its review that began in July after the loss of the Arizona contract, change in the company's corporate governance and equity infusion by Crestview Partners, LP.

Moody's also rated the $175 million proposed senior secured first-lien term loan due 2013 at B1 (LGD3, 42%) and $85 million proposed senior secured second-lien term loan due 2013 at B3 (LGD4, 64%).

The outlook is stable.

The confirmation of the corporate family rating reflects the risk associated with the high concentration of revenue with several major contracts, Moody's said.

The rating also reflects concern about volatile cash flow, low operating margins, limited free cash flow and adequate near-term liquidity, the agency said.

The company benefits from positive near-term momentum in its public health segment due to rate increases in existing contracts and the addition of new contracts, Moody's said.

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