Moody's eyes Encompass Health for cut

Moody's Investors Service said it placed the ratings of Encompass Health Corp., under review for downgrade including the Ba3 corporate family rating and Ba3-PD probability of default rating. The agency also placed under review for downgrade the Baa3 ratings of Encompass' senior secured revolving credit facility and term loan and the B1 ratings of the unsecured notes. There is no change to the SGL-1 speculative grade liquidity rating. The outlook is changed to under review from stable.

The review follows the announcement on Wednesday that Encompass will separate its home health and hospice divisions, which collectively represent about 22% of Encompass' total revenue, the agency said.

“The ratings review will focus on the credit impact from the separation of the home health and hospice businesses from Encompass' core inpatient rehabilitation facilities (IRF) business. Encompass plans to complete the spinoff in the first half of 2022. The review will contemplate the additional costs to run the independent businesses, the new capital structure and the fact that Encompass will be less diversified and reduce its scale after the spinoff,” Moody’s said in a press release.

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