Moody's rates Universal Hospital notes B3

Moody's Investors Service said it assigned a B3 (LGD 4, 57%) rating to Universal Hospital Services, Inc.'s proposed $175 million of second-lien senior secured payment-in-kind toggle notes. Moody's affirmed the corporate family and probability of default ratings at B2 and the $230 million of second-lien floating-rate notes due 2015 and $230 million of second-lien toggle notes due 2015 at B3 (LGD 4, 57% from 63%).

The outlook is stable.

The proceeds will be used to repay $136.5 million revolver draw, make a cash distribution to shareholders and option-holders of $34.5 million and pay transaction expenses.

The ratings reflect Universal Hospital's small size on both an absolute basis and relative to larger competitors, as well as the company's considerable financial leverage and weak interest coverage, the agency said. The company's business is extremely capital intensive and requires significant amounts of capital expenditures in order to achieve revenue and EBITDA growth.

The ratings are supported by Universal Hospital's leading market position in the medical outsourcing service business, its national footprint and diverse customer base, the agency added.

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