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5 min read
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23 Jul 2025
Moody's Ratings
New York, July 23, 2025 -- Moody's Ratings (Moody's) upgraded Team Health Holdings, Inc.'s ("Team Health") Corporate Family Rating (CFR) to B3 from Caa1 and Probability of Default Rating (PDR) to B3-PD from Caa1-PD.
We also assigned Caa1 to Team Health's new senior secured term loan due June 2028 and its new senior secured bonds, also due June 2028. There is no change to the Caa2 rating on the senior secured term loan B which will be withdrawn at transaction close. The outlook is stable.
The upgrade of Team Health's ratings reflects a decreased likelihood of default, driven by the company's proposed refinancing of its existing Term Loan B due 2027 with new senior secured term loan due June 2028 and new senior secured bonds due June 2028. The refinancing will prevent the activation of the provision that would otherwise accelerate the maturity of the company's revolving credit facility due in March 2028, its first lien notes due in June 2028, and its second lien notes due in January 2029, to early December 2026. The ratings upgrade also considers the sustained improvement in the company's operating performance and gradual deleveraging observed in recent quarters. Team Health has benefited from a recovery in business volumes, internal cost rationalization, and the successful resolution of payment disputes with commercial health insurance companies. Looking forward, we anticipate that Team Health will maintain an adjusted debt-to-EBITDA ratio in the mid-6x range over the next 12 to 18 months.
Governance risk consideration is material to the rating action. The refinancing transaction, which extends the company's maturity profile, combined with strong operating performance, have significantly improved the company's credit profile.
RATINGS RATIONALE
Team Health's B3 CFR reflects its moderately high financial leverage at 6.9x as of LTM 6/30/25, low albeit gradually improving EBITDA margin and free cash flow due to high debt service costs, and a challenging operating environment. Team Health has improved its operating performance in recent quarters after a difficult 2023 performance. We expect continued EBITDA growth and financial leverage to decline to the mid-6x range in the next 12-18 months. The rating is supported by Team Health's large scale and strong competitive position in the physician staffing industry.
We expect Team Health's liquidity to remain adequate. At the end of June 2025, the company had approximately $120 million in cash and $240 million available on its revolver. We expect that the company will generate positive free cash flow of $90-110 million (including cash conserved from paying up to $63 million interest in-kind) in the next 12 months.
The stable outlook reflects our expectation for the company to continue to moderately deleverage primarily through earnings growth.
The company's new senior secured term loan and new senior secured bonds are rated Caa1. The Caa1 instrument rating reflects limited and inferior quality of collateral support compared to what is available to the company's other tranches of debt (i.e., unrated revolver/1st lien notes/2nd lien notes ).
Marketing terms for the new credit facilities (final terms may differ materially) include the following: Incremental pari passu debt capacity up to the greater of $175 million and 35% of EBITDA, plus unlimited amounts subject to 4.85x first lien net leverage, with no inside maturity sublimit. A "blocker" provision restricts the transfer of material intellectual property to unrestricted subsidiaries. Transfers to unrestricted subsidiaries are only permitted up to the unrestricted subsidiary investment carve-out capacity. The credit agreement provides some limitations on up-tiering transactions, requiring affected lender consent for amendments that subordinate the debt and liens unless such lenders can ratably participate in such priming debt.
A comprehensive review of all credit ratings for the respective issuer(s) has been conducted during a rating committee
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Team Health's ratings could be downgraded if the company's liquidity deteriorates or if free cash flow turns negative. Earnings decline or margin compression could also lead to a ratings downgrade.
The ratings could be upgraded if Team Health improves its operating performance and profitability, maintains good liquidity and financial leverage below 6.0x.
Team Health Holdings, Inc., headquartered in Knoxville, TN, is a provider of physician staffing and administrative services to hospitals and other healthcare providers in the U.S. Team Health Holdings, Inc. is owned by private equity investor Blackstone Inc. and its revenue for the 12 months ended on March 31, 2025 was approximately $5.9 billion.
Issue Information International bonds Team Health Holdings, 13.5% 30jun2028, USD. Issue, Issuer, Yield, Prices, Payments, Analytical Comments, Ratings
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