S&P slashes Cano Health

S&P said it lowered Cano Health Inc.’s issuer and secured term loan ratings to CCC- from B-. The agency also cut Cano’s senior unsecured notes to C from CCC. The loan’s 3 recovery rating indicates meaningful (50%-70%; rounded estimate: 50%) recovery in default. The recovery rating on the unsecured notes remains 6.

S&P noted Cano withdrew its earning guidance and that its latest 10-Q filing contains a going-concern warning.

“Based on recent operating trends, we think the company could run out of cash within the next six-12 months. The company's medical cost ratio, a ratio of its third-party medical costs to its capitated revenues, spiked to 103.5% in the second quarter 2023 ended June 30, 2023, versus 82.6% same quarter 2022 and up sequentially from 84.2% in 1Q23. The company experienced a $58 million shortfall in capitated revenue in the second quarter due to lower-than-expected Medicare risk adjustment revenues. The company also saw an increase in medical costs related to higher medical utilization and costs associated with providing supplemental benefits,” the agency said in a press release.

The outlook is negative.

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