S&P Announces: Dental Service of Massachusetts Inc. Ratings Off Watch, Lowered; Outlook Stable.Business Editors NEW YORK--(BUSINESS WIRE)--April 6, 2004 On April 6, 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. lowered its counterparty Counterparty The other participant, including intermediaries, in a swap or contract. credit and financial strength ratings on Dental Service of Massachusetts (d/b/a Delta Dental Delta Dental is the largest and oldest dental plan system in the United States. The Delta Dental Plans Association is comprised of 39 independent Delta Dental member companies operating in all 50 states, the District of Columbia and Puerto Rico. of Massachusetts; DSM 1. DSM - Data Structure Manager. An object-oriented language by J.E. Rumbaugh and M.E. Loomis of GE, similar to C++. It is used in implementation of CAD/CAE software. DSM is written in DSM and C and produces C as output. ) to 'A+' from 'AA-' and removed the ratings from CreditWatch, where they had been placed on Jan. 27, 2004, after DentaQuest Ventures Inc. (DQV DQV Data Quality Verification ) announced that it had completed its acquisition of Doral Dental USA (Doral Dental). The outlook is stable. With the acquisition of Doral Dental by DQV (DSM's majority-owned for-profit subsidiary), Standard & Poor's expects that DSM's overall financial profile will be less conservative as a significant portion of the acquisition price will be funded with debt assumed. The quality of DSM's consolidated capitalization capitalization n. 1) the act of counting anticipated earnings and expenses as capital assets (property, equipment, fixtures) for accounting purposes. 2) the amount of anticipated net earnings which hypothetically can be used for conversion into capital assets. (including DQV), which Standard & Poor's currently views as extremely strong, would similarly be diminished di·min·ish v. di·min·ished, di·min·ish·ing, di·min·ish·es v.tr. 1. a. To make smaller or less or to cause to appear so. b. by the high level of goodwill and intangibles included in the acquisition price for Doral Dental. Also, because this is DQV's first major acquisition, Standard & Poor's expects the acquisition to carry some degree of risks, as with other significant acquisitions relative to a company's existing business. DQV's only previous acquisition involved a very small Mid-Atlantic dental provider in 2001. The ratings had originally been placed on CreditWatch after DQV announced that it had signed a definitive agreement to acquire Doral Dental. On March 9, 2004, Standard & Poor's said that on completion of the acquisition it would lower its ratings on DSM and change the outlook to stable. The acquisition was completed on April 5, 2004. Outlook Standard & Poor's expects that the expansion of DSM's business in non-Massachusetts markets will help to provide it with improved business diversification Diversification A risk management technique that mixes a wide variety of investments within a portfolio. It is designed to minimize the impact of any one security on overall portfolio performance. Notes: Diversification is possibly the greatest way to reduce the risk. geographically. More than 95% of DSM's consolidated revenues, including premium equivalents, currently come from the Massachusetts market. With the acquisition of Doral Dental, DQV will be obtaining an established dental benefits provider that operates in a completely different market, Dental Medicaid, and whose business is spread across a broad 17-state region. On a consolidated basis, including DSM and DQV, 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 debt-to-capital at year-end 2003 is about 45%, which is aggressive for the current rating category. The company did not have any debt previously. The increased financial leverage at DQV is expected to exert pressure on DSM's consolidated profit margins and reduce its level of capitalization conservatism; however, because of DQV and Doral Dental's strong earnings capacity, Standard & Poor's believes DQV can reduce its debt-to-capital ratio to about 30% in 2004, and interest coverage is expected to be very strong, at about 9x in 2004.
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Dental Service of Massachusetts
Counterparty credit rating A+/Stable/-- AA-/WatchNeg/--
Financial strength rating A+/Stable/-- AA-/WatchNeg
Complete ratings information is available to subscribers of RatingsDirect, Standard & Poor's Web-based credit analysis system, at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com; under Credit Ratings in the left navigation bar A set of buttons or graphic images typically in a row or column used as a central point that link you to major topic sections on a Web site. If the navigation bar is a single graphic image with multiple selections, it is known as an imagemap. See imagemap. , select Find Ratings, then Credit Ratings Search. |
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