Moody's: FHC Health direction uncertain

Moody's Investors Service said it placed the ratings of FHC Health Systems, Inc. under review with an uncertain direction following the announcement that Crestview Partners, LP will take an equity stake in the company, accompanied by a new governance structure. Terms of the deal were not disclosed and the transaction is expected to close by the end of the year.

The issuer has corporate family and probability-of-default ratings of B2, senior secured second-lien term loan due 2009 rated Ba3 (LGD 25%) and senior secured third-lien term loan due 2010 rated B3 (LGD 75%).

Moody's said it believes FHC is experiencing growth in its New Mexico, Pennsylvania and Kansas contracts and that the company has an opportunity to add additional contracts in new states.

The agency said it would examine any changes in the company's capital structure, especially changes in leverage, and focus on the company's pro-forma cash flow and earnings power excluding the Arizona contracts.

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