Moody’s cuts Duly

Moody's Ratings said it downgraded the ratings of Midwest Physician Administrative Services, LLC's (a core operating company of DMG Practice Management Solutions, LLC, referred to herein as Duly) including the corporate family rating to Caa1 from B3 and the probability of default rating to Caa1-PD from B3-PD. Moody's also cut Duly's senior secured first lien bank credit facilities to Caa1 from B3.

The downgrade ratings reflect weakening operating performance, and very high leverage of 7.8x for the LTM ended Sept. 30, 2023. Leverage has only improved modestly from about 8.3x at the end of March 31, 2023, and Moody's said it anticipates leverage to stay elevated in the next 12-18 months.

“The primary drivers for the spike in financial leverage were a surge in operating expenses including higher medical claims costs associated with the capitated plans. While labor pressures have improved, Duly has not been able to reduce its costs in order to prevent additional margin contraction. Duly has increased its reliance on capitated plans over the past year. There has been higher utilization sector-wide, which has pressured margins.

“Further, Moody's Ratings expects Duly to maintain weak liquidity with negative free cash flow generation and some dependency on external sources including the revolving credit facility,” the agency said in a press release.

The outlook is stable.

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