S&P rates U.S. Renal Care notes CCC+

S&P said it assigned a CCC+ rating and 6 recovery rating to U.S. Renal Care Inc.'s proposed $505 million unsecured notes.

The 6 recovery rating indicates 0 to 10% expected default recovery.

The agency also said it affirmed the B rating and 3 recovery rating to the company's senior secured credit facility, which consists of $1.6 billion term loan, which was downsized from $1.62 billion, and a $150 million revolver.

The B issuer credit rating reflects the company's high leverage, which is expected to remain at higher than 6x over the next couple of years under its new financial sponsor ownership, S&P said.

The ratings also reflect the company's small scale and narrow focus in the competitive dialysis treatment industry, the agency said.

Supporting the ratings is a view that the company will generate at least $70 million of discretionary cash flow in 2020 despite its high leverage, S&P said.

The dialysis treatment industry has always been subject to reimbursement risk, but the agency said it believes reimbursement pressure has increased over the last three years for U.S. Renal Care and the rest of the industry.

USRC's revolver, term loan and unsecured notes will be guaranteed by its immediate parent company and substantially all of the company's wholly-owned U.S. subsidiaries, but not by its non-wholly-owned subsidiaries, which generate about 72% of consolidated EBITDA, S&P said.

The agency said it believes the business would remain viable and would reorganize rather than liquidate after a payment default and valued the company on a going-concern basis using a 5.5x multiple.

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