S&P rates Apria loan BB, lowers notes

Standard & Poor's said it affirmed the B+ rating on Apria Healthcare Group Inc.

The outlook remains negative, reflecting doubts about Apria's ability to meet the expectation for cash flow over the next three quarters, said Tahira Wright, an S&P analyst.

S&P also said it assigned a BB rating to Apria's new $750 million term loan B with a recovery rating of 1, indicating 90% to 100% expected default recovery.

The agency also said it lowered the rating on the A-2 notes to B- from B and revised the recovery rating to 6 from 5. A recovery rating of 6 indicates 10% to 30% expected default recovery.

Apria's financial risk profile is considered aggressive, reflecting an expectation that adjusted leverage will remain between 4x and 5x over the near term, S&P said.

The financial risk profile also considers the company's current trend of operating at a cash-flow deficit, the agency said.

Free operating cash flow is expected to turn positive by 2013, S&P said.

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