TEXT-S&P rates Health Care REIT notes 'BBB-'

Wed Mar 28, 2012 3:31pm EDT

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-
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.