New York, July 29, 2009 -- Moody's Investors Service assigned a Ba3 (LGD3,
32%) rating to HCA Inc.'s (HCA) proposed offering of $750 million of first lien senior secured notes. Moody's also affirmed the existing ratings of HCA, including the B2 Corporate Family and Probability of Default Ratings. The outlook for the ratings is stable.
"The current transaction continues the company's efforts to proactively address the considerable amount of bank debt scheduled to mature in the
2012 and 2013 time frame," said Dean Diaz, Vice President -- Senior Credit Officer at Moody's. As such, the proposed issuance is not expected to result in any change in the company's leverage as the proceeds of the notes will be used to prepay a like amount of first lien bank debt.
Additionally, while the current offering and the April 2009 issuance of secured notes is expected to increase interest expense, it is not expected to materially affect cash flow and interest coverage metrics.
HCA's B2 Corporate Family Rating continues to reflect the significant leverage of the company resulting from the November 2006 leveraged buyout. The considerable interest cost associated with the debt load continues to constrain interest coverage metrics and limits free cash flow. The rating also reflects the anticipation that HCA's scale, market strength and recent focus on cost containment should aid in weathering the unfavorable trends in bad debt expense and weak volumes that have been and are expected to continue to plague the industry as a whole.
Additionally, the company is expected to maintain good liquidity over the next year.
For further details, refer to Moody's Credit Opinion for HCA on Moodys.com.
Moody's rating actions are summarized below.
Ratings assigned:
$750 million first lien secured notes due 2020, Ba3 (LGD3, 32%)
Ratings affirmed:
$2,000 million ABL Revolver due 2012, Ba2 (LGD2, 12%)
$2,000 million Revolving Credit Facility due 2012, Ba3 (LGD3, 32%)
$2,750 million Term Loan A due 2012, Ba3 (LGD3, 32%)
$8,800 million Term Loan B due 2013, to Ba3 (LGD3, 32%)
$1,250 million Euro Term Loan due 2013, Ba3 (LGD2, 23%)
$1,500 million first lien secured notes due 2019, Ba3 (LGD3, 32%)
$1,000 million Second Lien Notes due 2014, B2 (LGD4, 57%)
$3,200 million Second Lien Notes due 2016, B2 (LGD4, 57%)
$1,500 million Second Lien PIK Notes due 2016, B2 (LGD4, 57%)
Senior unsecured notes (various), Caa1 (LGD6, 90%)
Corporate Family Rating, B2
Probability of Default Rating, B2
Speculative Grade Liquidity Rating, SGL-2
Moody's last rating action was on April 14, 2009, when we assigned a Ba3 rating to HCA's first lien senior secured notes offering and affirmed the existing ratings of the company.
The principal methodology used in rating HCA was Moody's Global For-Profit Hospital Industry Methodology (September 2008), which can be found at www.Moodys.com in the Credit Policy & Methodologies directory, in the Ratings Methodologies subdirectory. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Credit Policy & Methodologies directory.
Headquartered in Nashville, Tennessee, HCA is the nation's largest acute care hospital company with 163 hospitals and 105 freestanding surgery centers (including eight hospitals and eight freestanding surgery centers that are accounted for using the equity method) as of June 30, 2009. For the twelve months ended June 30, 2009, the company recognized revenue in excess of $29 billion.