Moody's rates Community Health loans Ba3, notes B3

Moody's Investors Service said it assigned a Ba3 rating (LGD3, 31%) to Community Health Systems, Inc.'s proposed offering of $6.95 billion of senior secured credit facilities and a B3 rating (LGD5, 85%) to the proposed offering of $3.365 billion of senior unsecured notes.

The agency also assigned a B1 corporate family rating and B1 probability-of-default rating to Community Health. The speculative grade liquidity rating is SGL-2.

The bond proceeds will be used to fund the proposed acquisition of Triad Hospitals, Inc. and to refinance Community Health's existing debt.

On March 19, the agency said it might downgrade Community Health after the announcement that it would acquire Triad for $6.8 billion, creating the largest publicly traded hospital company in the United States.

The B1 corporate family rating reflects the deterioration of cash flow after the purchase of Triad and the expectation for negative free cash flow due to capital spending, Moody's said. The rating also considers the significant financial leverage and decreased interest coverage metrics. The size of the merger and the industry climate are also reflected in the rating, Moody's said.

But the rating also factors the agency's expectation that the company will cut debt over the next two years. The company also will gain scale and geographic and patient-mix diversity.

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