S&P cuts Sevita

S&P said it downgraded its ratings on National Mentor Holdings Inc. (Sevita) and its senior secured credit facility to B- from B and its second-lien debt to CCC from CCC+.

“The downgrade reflects thin free cash flow in 2022 due to rising operating cost and interest expense. Sevita's business model is very labor intensive and requires many relatively low-wage support staff in its facilities and for home care. We expect that revenue and EBITDA will be dampened by hiring and retention challenges due to the very tight labor market and the stressful nature of the work at Sevita,” S&P said in a press release.

The agency said it forecasts adjusted EBITDA margins to contract about 60 basis points in 2022 but widen about 150 basis points in 2023.

The outlook is stable.

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