S&P downgrades RadNet

Standard & Poor’s said it lowered the rating on RadNet Management Inc.’s first-lien debt to B from B+ and revised the recovery rating on the debt to 3 from 2.

The downgrade follows news that the company plans on adding $75 million to its first-lien term loan, S&P said.

RadNet will use proceeds from the add-on to acquire New York Radiology Partners, pay down the revolver and for general corporate purposes, the agency said.

The downgrade on the first-lien debt was based on weaker recovery prospects due to the incremental first-lien debt. The 3 recovery rating on the first-lien debt indicates 50% to 70% expected default recovery.

The existing recovery and issue-level ratings of the second-lien debt are unchanged, the agency said.

The company’s B corporate credit rating and stable outlook reflects the company’s single business focus in the competitive industry of diagnostic imaging, high capital intensity, relatively low barriers to entry and reimbursement risk, S&P said.

The ratings also consider an expectation that leverage will be in the low- to mid-4x range with the company generating moderate positive discretionary cash flow, the agency added.

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