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
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
UnitedHealth Group Inc.
Counterparty Credit Rating A/Stable/A-1
UnitedHealth Group Inc.
Senior unsecured notes A
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