Fitch assigns first-time B- Solis

Fitch Ratings said it assigned a B- long-term issuer default rating to SM Wellness Holdings, Inc. and its subsidiaries, WDT Acquisition Corp. and WRA Management, Inc. (collectively Solis Mammography). Additionally, the agency gave B/RR3 debt ratings to the first-lien senior secured debt and CCC/RR6 ratings to the second-lien senior secured debt. The outlook is stable.

“Solis' B- IDR reflects its solid position as a leading provider of breast imaging and its strength in partnering with leading hospital systems in attractive urban markets, offset by Fitch's expectation of an aggressive, debt-financed expansion strategy. Its sizable exposure to its largest JV partner, narrow focus on mammography and geographic concentration are also sources of risk,” Fitch said in a press release.

The agency noted that “Despite flat industry volumes, Solis' patient convenience/comfort-centered model and focus on annual screening compliance has driven same-facility volume growth exceeding 3% in recent years, with a large majority of patients returning every 12-18 months driving recurring revenue.”

Fitch said it sees leverage hovering in the 6x-7x range, albeit with continuing volume growth, rate increases and new investments driving a 15% CAGR in Fitch-defined EBITDA over the forecast horizon of 2026. “Fitch expects leverage in the range of 7x-7.5x for year-end 2023, continuing to decline with growth in EBITDA, but remaining above 6x through the forecast horizon of 2026.”

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