Dec 3 - Standard & Poor's Ratings Services said today that it assigned its
'B-' issue-level rating (two notches lower than the 'B+' corporate credit rating
on the company) to the proposed $1
billion senior unsecured notes issued by HCA Holdings Inc., due in eight
to 10 years. HCA Holdings Inc. is HCA Inc.'s holding company. We also assigned
the notes a recovery rating of '6', indicating our expectation of negligible (0
to 10%) recovery for lenders in the event of a payment default. HCA will use the
proceeds to fund another special shareholder dividend.
The corporate credit rating on HCA Inc. is 'B+'; our rating outlook is stable.
The rating reflects the company's uncertain prospects for third-party
reimbursement, its highly leveraged financial risk profile, and its
historically aggressive financial policies. Debt to EBITDA is about 4.6x. We
expect low-mid single digit organic revenue growth. For 2013, we expect the
absence of one-time adjustments and reimbursement pressure to cause HCA's
EBITDA margin to fall about 100 basis points. Other factors in this estimation
include our expectation for low-single-digit increases in same-facility
adjusted patient admissions and low-single-digit increases in net revenue per
admission. These estimates are consistent with current trends.
We expect leverage to be in the high-4x to 5x range. This includes our belief
HCA will continue to pay large shareholder dividends or conduct share
repurchases in an amount that will exceed its free cash flow generation,
suggesting debt outstanding will increase. We expect any acquisition activity
to increase debt further.
Still, the company's relatively diversified portfolio of 162 hospitals and
approximately 112 ambulatory surgery centers, generally favorable positions in
its competitive markets, and experienced management team partially mitigate
these risks and contribute to our assessment that HCA has a "fair" business
risk profile. These factors help protect the company from conditions that
confront several of its far smaller peers. (For the latest complete corporate
credit rating rationale, see Standard & Poor's research report on HCA Inc.
published Nov. 26, 2012, on RatingsDirect on the Global Credit Portal.)
RELATED CRITERIA AND RESEARCH
-- Criteria Guidelines For Recovery Ratings, Aug. 10, 2009
-- Business Risk/Financial Risk Matrix Expanded, May 27, 2009
-- Standard & Poor's Revises Its Approach To Rating Speculative-Grade
Credits, May 13, 2008
-- 2008 Corporate Criteria: Rating Each Issue, April 15, 2008
Corporate Credit Rating B+/Stable/--
HCA Holdings Inc. (borrower)
$1 bil. sr unsecured notes B-
Recovery Rating 6