Moody’s upgrades Fresenius

Moody’s Investors Service upgraded the long-term issuer rating of Fresenius Medical Care Holdings, Inc. to Baa3 from Ba2. Fresenius Medical Care is the holding company consolidating all U.S. operations of Fresenius Medical Care AG & Co. KGaA, which is rated Baa3. The outlook is stable.

The action ends a review begun on May 11.

Moody’s said the upgrade reflects the company’s standalone credit profile but also the fact that it is a material subsidiary of Fresenius Medical Care, generating around 70% of consolidated sales and EBITDA.

In addition, Moody’s expects that Fresenius Medical Care AG and Fresenius Medical Care Holdings will move to a wholly unsecured capital structure over time thereby reducing the structural subordination.

Fresenius Medical Care Holdings’ standalone operating profitability and credit metrics are relatively similar to those of its parent company, Moody’s said. Margin pressure in the U.S. dialysis business and strong growth of its margin-dilutive care coordination are mitigated by improvements in payor mix and costs.

In addition, Fresenius Medical Care Holdings has a very strong cash conversion and cash flow generation broadly in line with its parent.

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