MultiPlan Inc. Assigned 'B+' Ratings; Outlook Positive.Business Editors NEW YORK--(BUSINESS WIRE)--Feb. 18, 2004 On Feb. 18, 2004, Standard & Poor's Ratings Services Ratings Service A company, such as Moody's or Standard & Poor's, that rates various debt and preferred stock issues for safety of payment of principal, interest, or dividends. assigned its 'B+' counterparty Counterparty The other participant, including intermediaries, in a swap or contract. credit rating to MultiPlan Inc. The outlook is positive. At the same time, Standard & Poor's assigned its 'B+' senior secured debt rating to MultiPlan's $200 million senior secured credit facility, which will consist of a five-year, $180 million, two-part term loan arrangement and a five-year, $20 million revolver. In conjunction with this transaction, the company is also raising $144.7 million in preferred equity from GA Partners, a private equity firm, which cannot be redeemed until six months after the above-mentioned bank credit facilities credit facilities npl → facilidades fpl de crédito credit facilities npl → facilités fpl de paiement credit facilities have been repaid. MultiPlan is expected to use the proceeds to fund its acquisition of the U.S. Health division of BCE BCE abbr. 1. Bachelor of Chemical Engineering 2. Bachelor of Civil Engineering BCE Abbreviation for before the Common Era. Emergis, which was announced on Jan. 2, 2004. The ratings on New York-based MultiPlan, a preferred provider organization pre·ferred provider organization n. Abbr. PPO A medical insurance plan in which members receive more coverage if they choose health care providers approved by or affiliated with the plan. , reflect Standard & Poor's assessment of the company's highly leveraged capital structure (when preferred equity is counted as debt), narrow product scope, relatively small revenue base, and customer concentration. The ratings also reflect the company's established presence in its market segment, very strong adjusted earnings profile, experienced management team, and technological sophistication so·phis·ti·cate v. so·phis·ti·cat·ed, so·phis·ti·cat·ing, so·phis·ti·cates v.tr. 1. To cause to become less natural, especially to make less naive and more worldly. 2. . MultiPlan's/US Health's historical adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become margin has ranged from 30.0% to 40.0% over the last four years (2000-2003), which is considered very strong. Over the next one to five years, EBITDA margins will most likely remain stable because the company's market position could be at the low end of the historical range due to greater customer and competitive pressures. In 2004, Standard & Poor's believes Multiplan will be significantly transforming the structure and scale of its operations by converting its corporate form, acquiring and integrating a larger competitor, and taking on a significant investor in the form of an unaffiliated private equity firm. Outlook The positive outlook reflects the potential for the ratings on MultiPlan to be raised within 12-24 months if the company effectively integrates its acquisition of U.S. Health, maintains earnings consistency, and reduces its debt leverage. By year-end 2004 debt to EBITDA is expected to be 3.5x-4.5x when preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. is considered to be debt and 2.1x-2.3x when it is excluded, with EBITDA interest coverage of 9x-11x. Given Standard & Poor's expectation for sustained earnings strength and mandatory-prepayment provisions built into the lending agreement Lending agreement A contract regarding funds transferred between a lender and a borrower. , Standard & Poor's expects these ratios to improve steadily over the next five years as the term loan matures. By year-end 2004, about 60% of the combined entity's assets will consist of goodwill and other intangibles. As far as Standard & Poor's is concerned, MultiPlan's highly leveraged capital structure consists solely of debt because the convertible preferred equity shares include redemption features exercisable in five years. Accordingly, total book debt to capital is expected to be 130%-140% by year-end 2004 and remain near 100% through 2007. Ratings List MultiPlan Inc. Counterparty credit rating B+/Positive/-- Senior secured debt rating B+ |
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