S&P rates Aveanna loan CCC+

S&P said it assigned its CCC+ rating to Aveanna Healthcare LLC’s proposed $185 million first-lien term loan due in 2024. The recovery rating is 3, the same as for the first-lien debt, indicating expectations for meaningful (50%-70%; rounded estimate: 55%) recovery in the event of a default. “This represents our view of slightly weaker recovery prospects versus our previous expectation of 60% recovery due to the increase in first-lien debt,” S&P said in a press release.

The company intends to use the proceeds to fund several tuck-in acquisitions of private duty nursing companies and an adult home health company.

“The addition of adult home health will be a new business platform for the company. Although we view home health reimbursement as risky, particularly with the new Medicare reimbursement system (the patient-driven groupings model, which became effective on Jan. 1, 2020), we believe it has greater growth opportunities. We also believe management has extensive experience managing both reimbursement risk and acquisition integrations,” the agency said.

The CCC+ issuer and issue-level ratings on Aveanna are unchanged, and the outlook is negative, S&P said.

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