Apria Healthcare's Rtgs Afmd; Off S&PWatch.NEW YORK--(BUSINESS WIRE)--S&P CreditWire--June 19, 1998-- Standard & Poor's today affirmed its double-'B' corporate credit and bank loan ratings and its single-'B'-plus subordinated debt Subordinated Debt A loan (or security) that ranks below other loans (or securities) with regard to claims on assets or earnings. Also known as "junior security" or "subordinated loan". rating on Apria Healthcare Group Inc. All the ratings were removed from CreditWatch, where they were placed June 26, 1997. The CreditWatch placement followed the company's announcement that it was searching for strategic alternatives to enhance shareholder value. The company has terminated this effort. The outlook is negative. The speculative grade ratings on Costa Mesa Costa Mesa (kŏs`tə mā`sə), city (1990 pop. 96,357), Orange co., S Calif., on the Pacific south of Santa Ana; inc. 1953. It is a transportation, residential, and light industrial center. , Calif.-based Apria Healthcare reflects the company's leading position in home health care, offset by increasing cost containment cost containment, n the features of a dental benefits program or of the administration of the program designed to reduce or eliminate certain charges to the plan. pressures and the company's uncertain strategic direction. The 1995 merger of Abbey Healthcare Group with Homedco Group Inc. created a leading provider of home health care services. The company's ability to provide respiratory therapy respiratory therapy Medical profession concerned with assisting the respiratory function of individuals who have severe lung disorders. Practices include suctioning to clear secretions from the airway, use of aerosol mists (sometimes medicated) or gases to ease breathing, and infusion services on a national basis affords it a competitive advantage in securing large group contracts and offers potential operating economies. However, increasing third-party payor concerns with their rapidly growing home healthcare costs has put pressure on the company. In particular, Medicare, which accounts for 30% of Apria's revenues, effected a 25% reduction in home oxygen reimbursement Reimbursement Payment made to someone for out-of-pocket expenses has incurred. at the beginning of 1998. Additionally, the company was challenged to integrate its geographically disparate and operationally dissimilar branches. These problems led to substantial restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. and a change in management. However, the company appears to have stabilized, aided by a significant reduction in personnel and improvement in collection of accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying . Financially, Apria should be able to generate excess cash within parameters for the rating. OUTLOOK: NEGATIVE New management will be challenged to cope with reimbursement pressures while establishing a firmer foundation for the future. The strategic and financial responses to these issues may negatively impact Apria's credit profile, Standard & Poor's said. -- CreditWire
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Copyright 1998, Standard & Poor's Rating Services
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