Magellan Health Services jumped into the spotlight last week as Moody's Investors Service placed the company on review for a possible downgrade over concerns that it might violate its bank covenants. Bank debt levels were said to have dipped from the 97-98 range into the mid-90s after the report, although no trades could be confirmed. "No one wants to get in front of anything with risk," a dealer commented.
The rating agency anticipates that the behavioral healthcare company will be in violation of its bank covenants by September, based on management's revisions for year-end EBITDA. The company currently is trying to refinance its credit facility, but Moody's is concerned that the timing between the completion of the deal and the possible violation is tight. Calls to Mark Demilio, cfo of Magellan, were referred to a spokeswoman, who said the company is actively looking to refinance or amend the credit. "It's taking us longer because we are looking at all of our options," she added.