Moody's Upgrades Med Biz, Downgrades Two

  • 29 Apr 2001
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Moody's Investors Service has upgraded Teterboro, N.J.-based clinical lab testing business, Quest Diagnostics, Inc.'s $1.325 billion senior secured credit facility from Ba3, to a near investment grade Ba1. "Moody's is comfortable with the performance of the company, particularly the integration of SmithKline Beecham's clinical trials operation and the improved cash flow," noted Russell Pomerantz, v.p., senior analyst for Moody's.

The original debt, split into a $300 million revolving credit, a $400 million term loan, a $325 million "B" tranche, and a $300 million "C" tranche, has largely been repaid, leading to a stronger credit profile, said Pomerantz. With the increased rating, it is anticipated that the loan could become unsecured. Moody's has some concerns that the healthcare industry will face renewed pricing pressures and the company is converting to a standardized information technology system that could lead to integration risks. However, Moody's upgraded the hospital sector in January and the reimbursement issue has been mitigated.

* RailWorks Corporation's $225 million senior secured bank facility has been downgraded from B3 to Caa1. Poor operating performance for the fourth quarter last year and concerns over the ability of the company to remain in compliance with bank covenants and meet short-term obligations of debt and interest, prompted the action. Moody's believes the company's capital structure needs to be strengthened, with debt increasing to almost $381 million at the end of 2000, compared to $294 million at the end of 1999, while stockholders' equity decreased to $85 million from $136 million over the same period.

* Moody's also lowered the debt rating for the senior secured bank debt of United Pan-Europe Communications, the Dutch broadband communication services firm with over 7 million subscribers, from Ba3 to B1, reflecting the company's high financial leverage and debt service costs, which have grown beyond Moody's expectations. The bank loan totals about $3.6 billion, while the company also has over $5 billion of debt in senior unsecured notes. There are heightened concerns about the company's liquidity needs after 2002 and the likely sources of financing for anticipated shortfalls, according to Moody's.

Furthermore, the rating reflects the massive growth required in operating performance that needs to be realized in order to demonstrate some ability to service the company's debt obligation and the generally diminished recovery prospects in a downside scenario. The risk associated with furthering the network and introducing new services across a widely dispersed subscriber base also contributed to the action. However, the large size and scope of operations, the substantially upgraded status of cable infrastructure and the fairly limited competition in many of the company's market support the rating.

  • 29 Apr 2001

GlobalCapital European securitization league table

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1 Bank of America Merrill Lynch (BAML) 7,026 25 11.95
2 Citi 6,449 21 10.96
3 BNP Paribas 5,093 18 8.66
4 Barclays 4,040 11 6.87
5 Lloyds Bank 3,615 14 6.15

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2 Rabobank 1,292.64 1 9.39%
4 Mizuho 1,215.54 3 8.83%
5 Wells Fargo Securities 1,012.71 4 7.36%