Moody's Investors Service has assigned a Ba3 rating to HCA's planned $750 million offering of first lien senior secured notes, putting the hospital chain's offering in speculative-grade territory (less diplomatically known as "junk").
HCA expects to use the $750 million in proceeds to pay off bank debt scheduled to mature in 2012 and 2013. For that reason, its overall debt load won't change, nor will its cash flow or interest coverage, though both this and its April 2009 debt offering did boost its interest expense.
The rating comes as part of HCA's overall B2 corporate family rating, which continues to reflect Moody's concerns about the $30 billion overall debt load the company still carries as a result of its November 2006 leveraged buyout. HCA still faces substantial interest payments that aren't easy to make, tying up its free cash and limiting its options.
On the other hand, Moody's notes that things could be worse. The corporate family rating also reflects the agency's assumption that the hospital company's scale, market strength and renewed focus on cutting expenses should help it cope with lower patient volumes and higher bad debt loads facing the healthcare industry as a whole.
To learn more about Moody's decision process:
- read this Moody's press release
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