Fitch Assigns PacifiCare's New Credit Facility 'BB+'.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. today has assigned a 'BB+' bank loan rating to PacifiCare Health System's Inc. (PacifiCare) new credit facility. The Rating Outlook is Stable. PacifiCare intends to use the new facility to refinance its existing $150 term loan and fund the approximate $502 million acquisition of American Medical Security Group. Fitch affirmed all PacifiCare's ratings on Sept. 15, 2004 after the company announced its intention to acquire all of the outstanding shares of American Medical Security Group, Inc. (AMS AMS - Andrew Message System ), a publicly traded health insurer based in Green Bay, Wisconsin Green Bay is the county seat of Brown County in the U.S. state of Wisconsin. The city is located at the head of its namesake Green Bay, a sub-basin of Lake Michigan, at the mouth of the Fox River. . The new credit facility of $825 million will consist of a $200 million term loan A maturing in five years, a $425 million term loan B maturing in six years, and a $200 million revolver, which is not expected to be drawn upon at this time. After the close of the AMS transaction, PacifiCare will have approximately $1.09 billion of debt consisting of $625 million of term loans, $325 million of senior notes, and $135 million of subordinated convertible debentures Convertible Debenture Any type of debenture that can be converted into some other security. Notes: For example, a convertible bond can be converted into stock. . On a pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma basis, PacifiCare's financial leverage (as defined by the ratio of total debt to capital) is expected to increase to approximately 35%. Fitch expects PacifiCare to reduce outstanding debt following the acquisition and decrease financial leverage to under 30% by year-end 2005. Fitch expects EBIT/interest coverage ratios to remain above 10 times (x). PacifiCare's ratings continue to reflect it's well established competitive position in several major markets, improved outlook for the Medicare Advantage program following the passage of the Medicare Modernization Act in 2003, and the positive steps taken over the past two years to improve profitability and strengthen its balance sheet. While Fitch believes that improvements in margins in 2005 will be modest compared with 2004, profitability is expected to improve driven mainly by expanding membership growth in the senior and small group and individual segments. The ratings also consider PacifiCare's large Medicare exposure, Fitch's outlook for increased commercial pricing competition in 2005, and the challenges associated with rising medical costs and evolving regulatory environment. PacifiCare Health Systems PacifiCare Health Systems (former NYSE: PHS) was a Fortune 500 healthcare company based in Cypress, California. It was acquired by UnitedHealth Group (NYSE: UNH) in late 2005, which continues to market health plans under the PacifiCare name. , Inc. -- Bank loan rating assigned 'BB+' with a Stable Outlook. |
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