Moody's rates FHC loan B2

Moody's Investors Service assigned a B2 rating to FHC Health Systems Inc.'s proposed term loans, including the company's proposed $130 million senior secured term loan due 2009 and its $150 million senior secured delayed drawdown term loan due 2009.

Moody's also assigned a senior implied rating of B2 and a senior unsecured rating of B3 for FHC. The outlook is stable.

The ratings agency said the rating assignment reflects the company's high concentration of revenues among a few customer accounts, contract renewal risk, a material near-term decline in profitability expected for its federal contracts, and the moderately high financial leverage.

Factors somewhat mitigating these concerns include the company's favorable historical performance and its demonstrated success in retaining customers. Additionally, other favorable factors include the company's leading market position, favorable industry growth trends, experienced management team, and a proven ability to manage leverage.

FHC is entering a new credit agreement to refinance its existing debt. Pro forma for the refinancing, FHC will increase debt slightly, and leverage will be moderately high, Moody's said. Moody's noted the ratio of debt to EBITDA, including preferred stock, is expected to be in the low three times range for 2003.

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