S&P rates Triad subordinated notes B

Standard & Poor's assigned its B rating to Triad Hospitals Inc.'s planned $450 million senior subordinated notes due 2013. S&P also confirmed Triad's existing senior secured debt at BB, senior unsecured debt at B+ and subordinated debt at B ratings. The outlook is positive.

The senior secured bank loan is rated one notch above the corporate credit rating. Based on collateral value estimates, S&P said it believes that these measures offer a strong likelihood of full recovery of bank debt in the event of default.

S&P said the speculative-grade ratings on Triad reflect S&P's concern about the company's aggressive growth strategies, risks associated with potentially weaker future reimbursement by the government and other third-party payors, growing bad debt reserves and the challenges the company faces to maintain or improve its local market positions.

The company's strategy for increasing profitability centers on expanding the number of services offered, recruiting additional physicians, and strengthening relationships with physicians. Additional growth is expected to come from an aggressive strategy that incorporates joint venture partnerships with not-for-profit hospitals, potentially large acquisitions, new construction projects, and significant capital investment in existing facilities.

S&P said the company's results support the success of this strategy to date, as funds from operations to lease-adjusted debt improved to 26% as of June 2003 from 13% in 2001, and return on capital improved to 10.6% from 7.4% in 2001.

The ratings agency said that if Triad is able to continue to improve its operating performance, even with modest acquisition activity, the rating could be raised within the next few years.

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