S&P rates RegionalCare loan BB, notes B, CCC+

Standard & Poor’s said it assigned a B corporate credit rating to RegionalCare Hospital Partners Holdings Inc.

The outlook is stable.

RegionalCare Hospital Partners and Capella Healthcare Inc. recently agreed to merge and form RCCH Healthcare Partners in a debt-financed transaction.

RegionalCare will issue a $150 million asset-based lending facility, $800 million in senior secured notes and $350 million in senior unsecured notes to fund the transaction and repay RegionalCare’s and Capella’s existing indebtedness.

S&P said it assigned a BB rating to the company’s proposed ABL revolving credit facility with a 1+ recovery rating, indicating full recovery in a default event.

The agency also said it assigned a B rating and 3 recovery rating to the senior secured notes. The 3 recovery rating indicates 50% to 70% expected default recovery.

S&P also assigned a CCC+ rating and 6 recovery rating to the senior unsecured notes. The 6 recovery rating indicates 0 to 10% expected default recovery.

Once the merger closes, the agency said it will withdraw the B rating on the RegionalCare Hospital Partners.

Following the merger with Capella, the corporate credit rating on RegionalCare will reflect the company’s relatively small, moderately diversified hospital portfolio, average profitability relative to peers and relatively high level of adjusted leverage, S&P explained.

The company is expected to generate organic growth in line with the expected health care growth rate for 2016 and EBITDA is expected to remain stable for the next few years, the agency said.

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