Moody's affirms Rural/Metro

Moody's Investors Service said it upgraded Rural/Metro LLC's 9 7/8% senior subordinated notes due 2015 to B2 (LGD4, 56%) from B3 (LGD4, 59%) and affirmed the company's senior secured revolving credit facility due 2010, senior secured letter-of-credit facility due 2011 and senior secured term loan B due 2011 at Ba2 (LGD2, 12%).

The agency also affirmed parent company Rural/Metro Corp.'s corporate family and probability-of-default ratings at B2, affirmed its 12¾% senior discount notes due 2016 at Caa1 (LGD5) and changed the loss-given-default rate assigned to the notes to 89% from 91%.

The outlook is remains negative.

The agency said the upgrade of senior subordinated notes reflects the expectation of additional recovery at the subordinated debt level following the repayment of a meaningful amount of the company's senior secured term loan.

The affirmation of the B2 corporate family rating reflects the agency's expectation that the company will continue to operate with high financial leverage. Moody's said anticipated improvements in adjusted leverage and other credit metrics have not been realized as margins were pressured by increases in uncompensated care and Medicare and Medicaid denials.

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