S&P lowers U.S. Renal debt, rates loans B, CCC+,

Standard & Poor's said it assigned a B rating to U.S. Renal Care Inc.'s proposed $335 million incremental first-lien secured term loan and CCC+ rating to its proposed $160 million incremental second-lien secured term loan.

The agency said it removed the rating on U.S. Renal's existing first-lien debt from CreditWatch and lowered it to B from B+ because the amount of first-lien debt will increase relative to an estimate of the enterprise's value in the event of default.

The B corporate credit rating on the company is unchanged and the outlook is negative.

The agency said it assigned a 3 recovery rating to the new first-lien debt, indicating 50% to 70% expected default recovery, and a 6 recovery rating to the new second-lien debt, indicating 0 to 10% expected default recovery.

The recovery rating on the existing first-lien debt was revised to 3 from 2, which indicates 70% to 90% expected default recovery.

The proceeds of the new debt, along with other funds, will be used to finance its acquisition of Ambulatory Services of America, also a dialysis services provider.

The ratings reflect the company's vulnerable business risk profile, distinguished by its dependence on the treatment of a single disease, pressure from third-party payors to reduce payments, an unfavorable payor profile with a heavy reliance on Medicare and still relatively small scale, S&P said.

The highly leveraged financial risk profile incorporates pro forma lease-adjusted debt leverage of about 8x with expectations for gradual de-leveraging, the agency said.

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