Moody’s drops 21st Century Oncology, loan, notes

Moody's Investors Service said it downgraded 21st Century Oncology Inc.'s probability of default rating to D-PD from Caa3-PD to reflect interest payment default on its unsecured notes.

Concurrently, the agency downgraded the company's corporate family rating to Ca from Caa3, first-lien credit facility to Caa2 from Caa1 and unsecured notes to C from Ca.

The speculative grade liquidity rating was affirmed at SGL-4.

The outlook is negative.

Moody’s said 21st Century failed to make a semiannual interest payment (about $20 million) on its unsecured notes on Nov. 1, or within the 30-day cure period. This resulted in a default under the notes indenture and a cross-default under the company's credit agreement.

Furthermore, the company did not complete the second capital raise requirement of $25 million as of Nov. 30, triggering an additional event of default.

Moody's said it views the company's current capital structure as unsustainable given profitability pressures, annual interest expense of around $100 million and negative free cash flow.

The D-PD probability of default rating reflects the default and the Ca corporate family rating reflects the agency’s view of an average recovery for lenders in default.

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