S&P lowers Heartland Dental to negative

S&P said it revised the outlook on Heartland Dental LLC to negative from stable and affirmed its B- issuer credit rating.

The agency also said it affirmed the B- rating with a recovery rating of 3 on the first-lien debt, along with the CCC issue rating with a recovery rating of 6 on the senior unsecured notes.

Heartland Dental's accelerated pace of office expansion, along with increased one-time investments in 2018, have resulted in a decline of adjusted EBITDA margin of more than 200 basis points and a significant increase in 2018 leverage to 13.8x from 9x in 2017, S&P said.

The agency said it expects EBITDA margins to further erode to about 8% in 2019 as the addition of lower margin offices will likely offset the benefits from one-time investments.

The negative outlook reflects a view that Heartland's aggressive growth strategy heightens execution risk and will lead to higher leverage over the longer term, S&P added.

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