TEXT-S&P rates Humana Inc. planned notes 'BBB'
Dec 5 - Standard & Poor's Ratings Services said today that it has assigned its 'BBB' senior unsecured debt rating to Humana Inc.'s (NYSE: HUM) (BBB/Positive/--) planned issuance of approximately $1 billion in senior unsecured notes. This issuance will consist of a mix of 10-year and 30-year maturities. We expect Humana to use the debt proceeds to fund its pending acquisition of Metropolitan Health Networks Inc. (B+/Watch Pos/--), a Florida-based medical services organization (MSO). The transaction has already received federal antitrust clearance and we expect it to close by year-end 2012. The ratings are based on Humana's strong market shares in Medicare Advantage and Medicare Part D, favorable business growth trends, very strong risk-adjusted capitalization at the regulated insurance subsidiaries, and strong liquidity and financial flexibility. Slightly offsetting these strengths are Humana's very high business concentration in government-funded business, a historically underperforming commercial health insurance business, and the ongoing integration risks associated with an active M&A strategy. Strategically, the Metropolitan Health transaction makes sense in relation to Humana's growth needs and its overall integrated delivery strategy. Humana has experienced substantial Medicare-based growth nationally during the past several years. With its latest round of acquisitions, which has focused on MSOs and primary-care assets, Humana is effectively looking to gain more control over its provider base. This will allow it to better service its growing membership and more effectively execute its medical and care-management programs. Financially, Humana has enough balance sheet flexibility, from a holding company cash and debt leverage perspective, to acquire Metropolitan Health without any rating implications. As of Sept. 30, 2012, the holding company had total cash and short-term investments of $522 million. With the new debt issuance, Humana's adjusted debt-to-capital ratio increases from 21% as of Sept. 30, 2012, to 28% on a pro-forma adjusted basis. This is consistent with our long-term expectations that Humana will keep its debt-to-capital ratio in the 25%-30% range. RELATED CRITERIA AND RESEARCH Holding Company Analysis, June 11, 2009 RATINGS LIST Humana Inc. Counterparty Credit Rating BBB/Positive/-- New Rating Humana Inc. 10-Yr. And 30-Yr. Sr. Unsec. Notes BBB 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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