Moody’s cuts HealthSouth notes, rates loan Baa3

Moody's Investors Service said it affirmed HealthSouth Corp.’s Ba3 corporate family rating and Ba3-PD probability of default rating.

The agency also assigned a Baa3 rating to HealthSouth's incremental $300 million senior secured term loan.

Proceeds, along with a draw on the company's revolver will be used to fund the $750 million acquisition of EHHI Holdings Inc., which owns Encompass Home Health and Hospice. The acquisition is expected to close by the end of 2014.

Concurrently, the agency affirmed the ratings on HealthSouth's existing senior secured revolver and term loan at Baa3 and lowered the rating on its senior unsecured notes to B1 from Ba3.

The downgrade of the senior note rating reflects the significant increase in the amount of senior secured debt in the capital structure in the form of the incremental term loan and the considerable draw on the revolver.

Finally, Moody's affirmed HealthSouth's speculative grade liquidity rating at SGL-1.

The outlook remains stable.

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