TEXT-S&P rates UnitedHealth Group notes 'A'
Oct 17 - Standard & Poor's Ratings Services said today that it has assigned its 'A' senior unsecured debt ratings to UnitedHealth Group Inc.'s (NYSE:UNH) planned debt issuance, which the company expects to consist of a mix of three- to 30-year securities. We expect the company to use the offering proceeds to fund part of its acquisition of Amil Participacoes S.A. UNH expects the transaction to be finalized in the first half of 2013. We consider this transaction to be consistent with UNH's growth strategy, which is supported by a combination of organic development and acquisition. Pro forma debt leverage will be moderately above 35% after the transaction, but will return below that threshold by mid-year 2013. In our view, key risks relate to the sustainability of economic development in Brazil and the country's receptiveness to foreign investment. Key factors supporting UNH's current ratings and stable outlook include its very strong business profile, strong earnings and cash flow, and very strong financial flexibility relative to its peers and the sector overall. UNH operates as the established market leader across all key health benefits segments (particularly in the higher growth and more operationally sensitive government-sponsored segments), possesses extensive technological capability, and has demonstrated relatively keen market awareness about prospective risks and opportunities. By year-end 2012, we expect revenue to be approaching $110 billion and for membership to be above 36 million, and operating income (EBIT) and cash flow (EBITDA) to be $8.0 billion-$8.5 billion (7%-8% return on revenue) and $9.0 billion-$9.5 billion (8%-9% margin), respectively. If UNH were to perform at a level consistent with these expectations, adjusted EBITDA interest coverage would continue to be well above 10x. These results, combined with an expected cash position near $1.0 billion at the holding company level at year-end 2012, would likely continue to support a very strong liquidity position and strong financial flexibility assessment overall. RELATED CRITERIA AND RESEARCH Holding Company Analysis, June 11, 2009 RATINGS LIST UnitedHealth Group Inc. Counterparty Credit Rating A/Stable/A-1 New Ratings UnitedHealth Group Inc. Senior unsecured notes A Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column.
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