S&P rates Team Health notes CCC+

S&P said it assigned its CCC+ issue-level rating to Team Health Holdings Inc.'s proposed $1.015 billion senior unsecured notes due 2025, which are being issued by subsidiary Tennessee Merger Sub Inc., which is expected to be merged into parent company Team Health Holdings Inc. upon the close of the merger.

S&P assigned a 6 recovery rating to this debt, indicating an expectation of negligible (0%-10%) recovery for lenders in the event of a payment default.

This debt is being issued to finance the company's acquisition by financial sponsor Blackstone.

“Our B corporate credit rating on Team Health reflects the company's leading market position in the physician staffing industry, which we view as fragmented and very competitive. It also reflects our belief that the company is particularly susceptible to reimbursement risk, given that nearly half the company's revenues come from Medicare and Medicaid,” S&P said in a news release.

“However, we also think that demand for outsourced physician services will continue to grow faster than demand for health care services in general, and believe that the asset-light nature of the staffing business should promote some margin and cash flow stability over time,” the agency said.

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