Moody's lifts Select Medical to SGL-2, rates loan Ba2

Moody's Investors Service said it upgraded Select Medical Holdings Corp.'s speculative-grade liquidity rating to SGL-2 from SGL-4 and assigned a Ba2 (LGD2, 17%) rating to its new senior secured term loan tranche B-1 due 2014.

The agency also affirmed the company's corporate family and probability-of-default ratings at B2, its floating-rate senior notes due 2015 at Caa1 (LGD6) and Select Medical Corp.'s senior secured term loan due 2012 at Ba2 (LGD2) and 7 5/8% senior subordinated notes due 2015 at B3 (LGD4).

The loss-given-default rates were changed to 90% from 91% for the floating-rate notes, to 17% from 20% for the term loan due 2012 and to 66% from 69% for the 7 5/8% notes.

The outlook was changed to positive from negative.

Moody's said the SGL-2 rating anticipates a stronger liquidity position over the next four quarters as cash flow-generation benefits from the company's recently completed capital projects, the reduced need for capital spending and reduced interest cost.

The change in outlook reflects the improvement in credit metrics and enhanced financial flexibility resulting from the expected reduction of debt with the proceeds of the company's equity offering and the extension of the maturity of a portion of its capital structure, Moody's said.

The ratings continue to reflect the considerable financial leverage of the company even after the repayment of debt with the proceeds from its initial public offering, the agency added.

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