Moody’s views Forefront Dermatology negatively

Moody’s Investors Service said it revised its outlook for Forefront Dermatology (Dermatology Intermediate Holdings III, Inc.) to negative from stable and affirmed its ratings, including its B2 ratings on the $95 million senior secured first-lien revolving credit facility, $535 million senior secured first-lien term loan and $100 million senior secured first-lien delayed-draw term loan.

Forefront piled on more debt to fund its growth strategy than Moody’s said it had expected.

“Moody's considers liquidity to have deteriorated as the company has relied on its revolving credit facility in order to fund its growth. While Forefront Dermatology has been able to convert some of its growth investments to EBITDA, additional debt incurred over the past several quarters has caused debt/EBITDA to rise from 6.3x as of Sept. 30, 2022, to roughly 7x LTM Sept. 30, 2023, on a Moody's adjusted basis,” the agency said in a press release.

Moody’s said it had previously expected Forefront to bring its leverage under 6x by Dec. 31 but that was based on a less aggressive growth strategy.

“There are risks that leverage will remain elevated if the company continues to debt fund its future growth or faces unforeseen operating setbacks,” the agency said.

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