A $200 million add-on credit for Genesis Health Ventures has been re-priced after Standard & Poor's weighed in with a B+ rating, one notch lower than the Ba3 opinion offered byMoody's Investors Service. "S&P is a little misinformed and took a different view to the collateral package than Moody's," one banker said. The $200 million add-on to the existing "B" piece was priced at LIBOR plus 31/ 2%, but it has been flexed upward to LIBOR plus 33/ 4% to reflect the rating, he noted, adding that the loan also is being offered with a 50 basis point discount. Bankers at First Union and Goldman Sachs, which are leading the credit, either declined to comment or did not return calls. A spokeswoman for Genesis Health also did not return calls.
The S&P rating reflects the additional $200 million principal burden on the pledged collateral package, according to David Peknay, analyst. "Although asset coverage presently appears ample for the senior credit facilities, the likelihood of full principal recovery of the larger obligation could diminish under a default scenario," Peknay said. In addition, since S&P assigned a BB- rating to Genesis Health's secured credit facility last year, the company has added $300 million of bank debt without the asset base gaining very much, he noted.
The add-on credit backs the company's acquisition of NCS Healthcare and will be consolidated with Genesis' existing $285 million "B" piece and its existing $80 million delayed-draw term loan to form a new $565 million institutional tranche (LMW, 10/7). The existing $515 million credit facility was put in place last year as Genesis emerged from Chapter 11 bankruptcy protection.