S&P ups Cotiviti loans, reviews upward

S&P said it placed its B corporate credit rating on Cotiviti Corp. on CreditWatch with positive implications.

At the same time, the agency raised its issue-level rating on the company's first-lien credit facilities to B+ from B (these facilities include a $75 million revolving facility expiring May 2019 and $810 million term loan due May 2021).

S&P also revised its recovery ratings on the first-lien facilities to 2 from 3, indicating an expectation for lenders to receive substantial (70%-90%, in the lower half of the range) recovery in the event of a default. These ratings are now on CreditWatch with positive implications.

At the same time, the agency placed its CCC+ rating on the company's $265 million second-lien term loan due May 2022 on CreditWatch with positive implications. The recovery rating is unchanged at 6, indicating an expectation for lenders to receive negligible (0%-10%) recovery in the event of payment default.

S&P estimates the company's adjusted debt was about $1.1 billion as of Dec. 31, 2015, which includes adjustments for operating leases.

S&P said the CreditWatch placement follows Cotiviti's recent announcement that it is seeking to raise capital with its current owner, Advent International, by selling shares through an IPO. The agency expects the company to use a portion of net proceeds from the transaction to reduce debt.

This, coupled with the view that debt-to-EBITDA leverage could be sustained below 4.5 times and the reduction of financial sponsor influence, could lead the agency to reassess its view of Cotiviti's financial risk profile and lead to an upgrade.

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