TEXT-S&P rates Health Care REIT notes 'BBB-'
March 28 - Standard & Poor's Ratings Services today assigned its 'BBB-' rating to the $600 million 4.125% senior notes due 2019 issued by Health Care REIT Inc. (HCN). The company will use proceeds from this offering to repay existing indebtedness and for general corporate purposes. Our rating on Toledo-based HCN reflects a "satisfactory" business risk profile supported by the company's large and diversified health care portfolio that is largely private pay (70%), seasoned management, and rent coverage that should continue to produce stable cash flow. We acknowledge the company's significant growth and the addition of exposure to senior housing assets structured through taxable REIT subsidiaries, which could increase cash flow volatility due to their sensitivity to economic trends. We view the financial risk profile as "intermediate," marked by moderate leverage and fixed-charge coverage (FCC), which is sufficient for the current platform and rating, and adequate liquidity. The company has funded a majority its recent growth with equity, and we expect HCN will continue to prudently underwrite and finance new investments. The positive outlook reflects our view that we may raise our rating on HCN over the next 12-24 months if the company pursues accretive growth that it finances prudently such that key credit metrics strengthen. This includes sustaining FCC at or above 2.5x and debt-plus-preferred/EBITDA near 6.0x-6.5x while maintaining adequate liquidity. An upgrade will also hinge on the smooth integration of recent acquisitions, as well as the ability of its skilled nursing facility operators to absorb recent and potential future cuts to government reimbursement without any meaningful impact to HCN's rental stream. We would revise our outlook to stable or lower our rating if HCN pursues aggressive debt-financed growth or experiences integration challenges or portfolio/tenant stress that causes FCC to fall below 2.3x for a prolonged period. RATING LIST Health Care REIT Inc. Corporate credit rating BBB-/Positive New Rating Health Care REIT Inc. $600 mil. 4.125% Senior unsecured notes BBB-
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