December 26, 2012 / 7:51 PM / 7 years ago

TEXT - S&P raises Heartland Dental Care LLC rating to B-plus

(The following statement was released by the rating agency)
    Dec 26 - Standard & Poor's Ratings Services said today that it raised its
rating on Effingham, Ill.-based dental practice management services provider
Heartland Dental Care LLC's $100 million first-lien revolving credit facility
and $400 million first-lien term loan to 'B+' from 'B'. We raised our rating on
this first-lien debt because the amount is $50 million less than originally
proposed. We therefore estimate a higher recovery for first-lien lenders in the
event of default. We revised our recovery rating on the first-lien debt to '2',
indicating our expectation for substantial (70% to 90%) recovery of principal in
the event of payment default, from '3', indicating meaningful (50% to 70%)
recovery in the event of payment default. 

Our B/Stable/-- corporate credit rating on Heartland is unaffected by the 
revised capital structure, as is our 'CCC+' rating on Heartland's second-lien 
debt (recovery rating '6'). Although Heartland issued $50 million more 
second-lien debt and interest rates on all new debt were higher than proposed, 
we expect EBITDA interest coverage, now projected to be 2.2x in 2013, compared 
with our previous estimate of 2.3x, to remain consistent with the rating.   

The rating on Heartland reflects its "highly leveraged" financial risk 
profile. As of Sept. 30, 2012, pro forma adjusted debt to EBITDA is 8.2x. We 
expect leverage to decline to about 6.2x, still high, within about two years 
largely as a result of EBITDA growth. We consider Heartland's business risk 
profile to be "vulnerable," characterized by its narrow scope of operations in 
intensely competitive markets with low barriers to entry. Heartland's 
affiliated professional corporations, which are not owned by Heartland, 
operate 381 dental care offices in 21 states, with some concentration in the 
Midwest and Florida. (for the latest complete credit rating rationale, see 
Standard & Poor's report on Heartland Dental Care LLC, published Nov. 30, 
2012, on RatingsDirect.)  

RELATED CRITERIA AND RESEARCH
     -- Business Risk/Financial Risk Matrix Expanded, Sept. 18, 2012
     -- Liquidity Descriptors For Global Corporate Issuers, Sept. 28, 2011
     -- Criteria Guidelines For Recovery Ratings, Aug. 10, 2009
     -- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008

RATING LIST
Heartland Dental Care LLC

Corporate credit rating          B/Stable/--

Rating Revised                   To        From
Senior secured first-lien debt   B+        B
 Recovery rating                 2         3

 (Caryn Trokie, New York Ratings Unit)
0 : 0
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