November 19, 2012 / 6:16 PM / in 5 years

TEXT-S&P keeps Medical Card System's CCC rtg on watch

Nov. 19 - Overview

-- San Juan, Puerto Rico-based Medical Card System Inc. (MCS) has not yet filed its year-end 2011 financial statements with its lenders, resulting in a violation of its credit agreement.

-- The company’s management continues to negotiate with lenders to revise or waive certain credit agreement provisions to avoid a liquidity event.

-- We are keeping our ratings on MCS on CreditWatch with developing implications.

-- We expect MCS’s financial profile to improve through positive operating results in 2012 compared with losses in 2011 and first-quarter 2012. Rating Action On Nov. 19, 2012, Standard & Poor’s Ratings Services said that its ‘CCC’ long-tern counterparty credit rating on Medical Card System Inc. (MCS) remains on CreditWatch with developing implications, where we initially placed it on July 26, 2012. The ‘B’ long-term financial strength and counterparty credit ratings on MCS’s operating companies, MCS Advantage Inc., MCS Life Insurance Co., and MCS Health Management Options Inc. also remain on CreditWatch with developing implications. Rationale The continuing CreditWatch reflects our expectation that MCS will improve its financial profile through positive operating results in 2012, compared with losses in 2011 and first-quarter 2012. This expectation is based on the company’s positive operating results for second-quarter 2012 and further significant improvement in third-quarter 2012. This improvement is driven by various corrective actions taken by the company’s new senior management team, which joined the company in December 2011 and includes enhanced medical-management capabilities and an improved financial infrastructure. Furthermore, management is meeting regularly with the lending group regarding potential waivers or revisions to the credit agreement to avoid a liquidity event, and we expect audited year-end 2011 financial statements to be available in December 2012. CreditWatch We could raise or lower the ratings on MCS and its operating companies in connection with its operating performance and its lender negotiations. Improved operating performance and a near-term successful lender negotiation could result in a one-notch or more upgrade. Conversely, if the company produced operating losses in 2012 or if lender negotiations prove unsuccessful beyond the near term, we could lower the ratings by one or more notches. Related Criteria And Research

-- Holding Company Analysis, June 11, 2009

-- Analysis of Nonlife Insurance Operating Performance, April 22, 2009 Ratings List Ratings Affirmed; Remain On CreditWatch Medical Card System Inc. Counterparty Credit Rating Local Currency CCC/Watch Dev/-- MCS Advantage Inc. MCS Life Insurance Co. MCS Health Management Options Inc. Counterparty Credit Rating Local Currency B/Watch Dev/-- Financial Strength Rating Local Currency B/Watch Dev/-- Medical Card System Inc. Senior Secured CCC/Watch Dev Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal at All ratings affected by this rating action can be found on Standard & Poor’s public Web site at Use the Ratings search box located in the left column. Primary Credit Analyst: Neal I Freedman, New York (1) 212-438-1274; Secondary Contact: Hema Singh, New York (1) 212-438-7254;

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