Moody's downgrades Radiology Partners

Moody's Investors Service said it downgraded Radiology Partners, Inc.'s ratings, including the corporate family rating to Caa3 from Caa1, the probability of default rating to Caa3-PD from Caa1-PD, the backed senior secured first-lien term loan, backed senior secured first-lien revolving credit facility and senior secured notes ratings to Caa2 from B3 and the rating on the company's senior unsecured notes to Ca from Caa3.

“The ratings downgrade reflects increasing refinancing risk due to upcoming debt maturities and the likelihood of a transaction that Moody's would consider a distressed exchange. Moody's believes that the company's high leverage and volatile refinancing conditions may challenge the company's ability to address near-term maturities. The $440 million backed senior secured first lien revolving credit facility, which was $335 million drawn at September 30, 2023, expires November 2024. Significant debt maturities in 2025, including the backed senior secured first-lien term loan in July 2025 and senior secured notes in December 2025, further complicate the refinancing process,” the agency said in a press release.

Moody’s noted the company’s cash burn has recently declined, but it forecasts liquidity to remain anemic over the next 12-18 months with slim positive free cash flow.

“Moody's believes cash generation, including a potential arbitration award from a large payor, will be insufficient to repay the revolving credit facility if a refinancing transaction is unsuccessful. Moody's calculates Radiology Partners' debt to EBITDA to be approximately 10 times as of Sept. 30, 2023. Moody's expects material deleveraging over the next 12 to 18 months mostly due to earnings growth from ongoing pricing initiatives and new business wins; the cost to support this new business growth will continue to be a significant drag on near-term cash flows,” the agency explained.

The outlook is maintained at stable.

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