Moody's upgrades Universal Hospital, rates loan B1

Moody's Investors Service said it upgraded Universal Hospital Services, Inc.'s corporate family rating to B1 from B2 and probability of default rating to B1-PD from B2-PD.

Moody's also assigned B1 (LGD 4) ratings to the company's proposed $150 million first-lien credit facilities due 2023 and $660 million delayed-draw first-lien term loan due 2025.

The company's speculative grade liquidity rating also was upgraded to SGL-1 from SGL-2.

The outlook remains stable.

The proceeds from the new credit facilities, along with cash on hand and newly issued common equity, will be used to fund Federal Street Acquisition Corp.'s acquisition of Universal in a transaction valued at about $1.74 billion, Moody's said.

Following the merger, which is expected in the fourth quarter of 2018, Universal will be a subsidiary of Federal Street, which will be renamed Agiliti, and will be a publicly traded company, the agency explained.

There is no change to the B3 rating assigned to Universal's existing 7 5/8% notes due 2020.

A mandatory redemption notice for these notes will issue on the closing date of the merger between Universal and Federal Street, the agency said.

These notes will be redeemed 30 days after the redemption notice using proceeds from the $660 million deferred-draw term loan. Moody's said it will withdraw the ratings on the existing 2020 notes upon full repayment.

The upgrades reflect expectations that following the merger, the company will operate with more moderate financial leverage with a debt-to-EBITDA ratio expected to approach 4.75x by the end of 2018, the agency said.

Moody's also said it expects Universal will maintain its track record of consistent growth in revenues and earnings as it benefits from its market-leading position.

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