Fitch Upgrades Health Net's Sr. Notes to 'BBB+' from 'BB+'.CHICAGO -- Fitch upgrades the $400 million of 8.375% senior unsecured notes due April 2011 of Health Net, Inc. (HNT HNT Hostage Negotiation Team ) to 'BBB+' from 'BB+', following an in-substance defeasance In-substance defeasance Process through which debt is removed from the balance sheet but not canceled. of the notes. Today's rating action is specific to the issuance noted above, and has no effect on Fitch's other ratings on Health Net or its subsidiaries. The Outlook remains Stable. Health Net's in-substance defeasance of the notes was accomplished through the purchase and placement in an account for the benefit of the holders of the Senior Notes, U.S. Treasury securities U.S. Treasury securities Interest-bearing obligations if the U.S. government issued by the U.S. Department of the Treasury as a means of borrowing money to meet government expenditures not covered by tax revenues. in an amount that will generate cash flow sufficient to make all remaining principal and interest payments on the notes. The purchase of the Treasury securities was funded by Health Net's entrance into a $200 million bridge loan maturing on September 22, 2006 and a $300 million term loan maturing on June 23, 2011. Fitch expects Health Net to redeem all of the company's outstanding senior notes during the third quarter of 2006. As a result of the pledge of the U.S. Treasury obligations for the benefit of the holders of the senior notes under a security and control agreement, Fitch will rate the $400 million in senior notes outstanding as very well secured obligations. Accordingly, Fitch will now rate the notes assuming recovery consistent with a Recovery Rating of RR1, which indicates Fitch's expectation for outstanding recovery prospects given default. These improved recovery prospects suggest a rating on the collateralized notes that is two notches above the parent company's long-term Issuer Default Rating (IDR IDR In currencies, this is the abbreviation for the Indonesian Rupiah. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. ), currently 'BBB-'. Fitch's ratings on HNT continue to reflect the company's moderate financial leverage, good competitive position in the health insurance/managed care markets in California, and strong presence in the traditionally stable margin Tricare business. The ratings also reflect industry challenges related to the rapidly increasing cost of providing health care, increasing competitive pressures, and regulatory and legal challenges that may affect the extent to which industry participants can manage costs and price their products appropriately. Health Net, Inc. (HNT) is among the largest publicly traded managed care operations in the U.S., reporting Dec. 31, 2005 enrollment of 6.3 million individuals, including enrollment associated with its Tricare business. Although HNT's largest presence is in the State of California, the company operates in a total of 27 states. The company provides a variety of indemnity, PPO PPO abbr. preferred provider organization PPO Managed care Preferred provider organization, see there Infectious disease Pleuropneumonia-like organism, see there , POS (1) See point of sale and packet over SONET. (2) "Parent over shoulder." See digispeak. POS - point of sale , and HMO HMO health maintenance organization. HMO n. A corporation that is financed by insurance premiums and has member physicians and professional staff who provide curative and preventive medicine within certain financial, plans in the group, individual, Medicare risk, Medicaid, and Tricare markets. The following rating was upgraded to 'BBB+' from 'BB+': Health Net, Inc. --$400 million 8.375% senior unsecured notes due April 15, 2011 The Rating Outlook is Stable. Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from the 'Code of Conduct' section of this site. |
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