Credit ratings giant Moody's Investors Service has placed Envision Healthcare Corporation’s ( ratings on review for downgrade. This followed the announcement that KKR, a private equity firm, will acquire the company for $9.9 billion in cash. The outlook also remains under review.
The acquisition is expected to be completed during the fourth quarter of 2018.
The ratings put under review by Moody’s include the B1 Corporate Family Rating, B1-PD Probability of Default Rating and all debt instrument ratings. Concurrently, the agency has affirmed Envision's SGL-1 Speculative Grade Liquidity Rating, given the company’s impressive cash balance, ample revolver availability and a good free cash flow. However, Envision's post-LBO (leveraged buyout) liquidity is not reflected through the SGL-1 rating.
The rating agency review of KKR’s pending LBO of the company will be focused on the go-forward capital structure and resulting leverage, coverage as well as cash flow generating capabilities. Moreover, its B1 Corporate Family Rating shows the company’s aggressive acquisition strategy as well as its moderately high financial leverage.
Envision’s credit profile is supported by its scale and market position as the largest physician outsourcer. Additionally, the credit base is cushioned by solid geographical footprint and product diversification with physician staffing and ambulatory surgery center segments.
The SGL-1 rating is indicative of the company’s strong cash generation ability, impressive existing cash balance and its access to $650 million ABL revolver that expires in 2021.
Shares of this Zacks Rank #2 (Buy) have surged 33.8% in the past six months, outperforming its industry’s rally of 11.35%.
Other Stocks to Consider
Investors interested in the outpatient and home healthcare sector may also take a look at some other top-ranked players such as Amedisys, Inc. (AMED - Free Report) , AAC Holdings, Inc. (AAC - Free Report) and Chemed Corporation (CHE - Free Report) .
Amedisys and subsidiaries provide healthcare services in the United States. The company sports a Zacks Rank #1 (Strong Buy) and managed to pull off an average four-quarter positive earnings surprise of 10.58%. You can see the complete list of today’s Zacks #1 Rank stocks here.
AAC Holdings offers inpatient and outpatient substance abuse treatment services to patients in the United States. It carries a Zacks Rank of 2 and delivered an average trailing four-quarter beat of a whopping 101.43%.
Chemed Corporation provides hospice and palliative care services in the United States and is a Zacks #2 Ranked stock. In the past four quarters, it came up with an average positive surprise of 9.60%.
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