Community Health Systems Inc. Downgraded To 'CC' From 'CCC-' On Distressed Note Exchange; Outlook Negative
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- U.S.-based hospital operator Community Health Systems Inc. has announced
the results of its three tender offerings for senior unsecured notes due
in 2019, 2020, and 2022.
- As we previously noted, the maturities in 2019 and 2020 are tendered at
par and as such we are not considering them distressed.
- We view the exchange of the 2022 notes as a distressed transaction
because they are tendered at a material discount to par and because the
amount that will be tendered is at a level we consider material.
- As a result, we are lowering the corporate credit rating to 'CC' from
'CCC-'.
- We are removing the corporate credit rating and the rating on the notes
from CreditWatch.
- The outlook is negative reflecting the likelihood we will lower the
corporate credit rating to 'SD' at the close of the transaction and lower
the rating on the notes due 2022 to 'D'.
NEW YORK (S&P Global Ratings) June 21, 2018--S&P Global Ratings today lowered
its corporate credit rating on Franklin, Tenn.-based hospital operator
Community Health Systems Inc. to 'CC' from 'CCC-'. The outlook is negative. We
removed the ratings from CreditWatch, where we originally placed them with
negative implications on May 9, 2018.
The senior secured first-lien rating remains 'B-', with a recovery of '2', and
the senior unsecured and related recovery ratings are unchanged. If the
transaction closes as anticipated, we will lower the issue-level rating on the
unsecured notes due 2022 to 'D'. We will reevaluate our corporate credit
rating on the company and the issue-level ratings following the close of the
tender.
Community Health Systems has announced the participation amounts for its three
separate cash tender offers to holders of its senior unsecured notes due in
2019, 2020, and 2022. In order for any of the exchanges to take place, there
needed to be at least 90% participation in the tender for the 2019 notes. The
aggregate amount of the amounts tendered for all three notes is capped at
$3.125 billion. The company reached the 90% minimum requirement.
We view the tender for the 2022 notes as distressed because participating
noteholders will receive significantly less than par value as part of the
tender. The other two notes are tendered at par. We expect to lower the
corporate credit rating to 'SD' and ratings on the 2022 notes to 'D' at the
close of the transaction. The company plans to use proceeds from the proposed
term loans to support the tender offers.
Once the transaction has closed, we will lower the corporate credit rating to
'SD' and the rating on the 2022 senior unsecured notes to 'D'. This reflects
our expectation that the 2022 notes will participate in the tender.
We will reevaluate the corporate credit rating and issue-level ratings
following the close of the tender. In our review, we will emphasize our
expectations for liquidity in the face of a still significant maturity
schedule through 2019 and beyond.