Moody’s rates Cotiviti, loans B2

Moody's Investors Service said it assigned a B2 corporate family rating and a B2-PD probability of default rating to Cotiviti, Inc. in connection with its announced acquisition by affiliates of investment firms KKR & Co. Inc. and Veritas Capital. Moody's also assigned a B2 rating to the company's planned backed senior secured first-lien bank credit facilities, consisting of a $5 billion term loan due 2031 and $600 million revolving credit facility expiring in 2029. The outlook is stable.

The term loan and new common equity will fund the leveraged buyout of the company, including repayment of the company's debt, fund balance sheet cash at close, and pay related fees and expenses. Moody's said it would then withdraw all of Verscend Holding Corp.’s ratings upon the close of the transaction and the repayment of its debt obligations.

“Cotiviti's B2 CFR reflects the company's high debt to EBITDA leverage, estimated to be 6.3x (Moody's adjusted) at Sept. 30, 2023, pro forma for the proposed financing, that Moody's expects will decline given revenue growth and increasing profitability to approach the low-5x range by the end of 2025,” the agency said in a press release.

The outlook reflects an expectation that Cotiviti will maintain organic revenue in a high single-digit range, debt to EBITDA below 6.5x and about $170 million of free cash flow in 2024, Moody’s said.

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