S&P trims Team Health

S&P said it lowered its ratings on Team Health Holdings Inc. and its remaining first-lien term loan due 2027 to CCC from CCC+ and lowered the rating on the unsecured notes to CC from CCC-. The recovery rating on the term loan was revised to 4 from 3 and the recovery rating on the unsecured debt remains 6.

S&P noted the company's refinancing of its term loan creates a12 month runway until its springing maturity next November. The company issued $750 million of 13˝% first-lien notes due 2028 and a new $510 million accounts receivable facility. Team Health will use the funds to refinance its remaining $1.16 billion senior secured term loan due in February. It also announced that it extended its revolving credit facility until March 31, 2028.

“We expect the company will generate negative cash flow in 2023 and 2024, likely no better than breakeven in 2025. The combination of rising rates and declining profitability led to a significant deterioration in cash flow generation in 2023. We expect adjusted free operating cash flow will remain substantially negative, at roughly negative 3% to negative 5% of adjusted debt,” S&P said in a press release.

Team Health’s term loan is trading in the low 70 cent range and its 2025 bonds are trading around 80 cents with a yield in the high 20% area.

“We believe this elevates the risk of a distressed exchange or below-par repurchase which results in the lenders receiving less than the original promise, which we would view to be akin to default,” the agency said.

The outlook is negative.

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