S&P rates MedCath, loan B+

Standard & Poor's said it assigned its B+ corporate credit rating to MedCath Holdings Corp. and its B+ bank loan rating and its recovery rating of 3 to the company's proposed $200 million senior secured credit facility due in five to seven years and its B- senior unsecured debt rating to the company's proposed $150 million senior unsecured notes due in 2014.

The outlook is negative.

"The low speculative-grade ratings reflect MedCath's narrow focus in a rapidly growing but competitive business," said S&P credit analyst David Peknay.

S&P said the company also faces reimbursement risk, as it relies heavily on Medicare as a key revenue source. The ratings further reflect the risk associated with possible payment changes for the company's undiversified array of services and its relatively high debt levels and the risk that regulatory changes relating to MedCath's physician investment partners may harm the company's business model.

These concerns are only partially offset by the company's relatively large presence in its industry, which is expected to expand rapidly as favorable demographic trends support future demand for its services, according to S&P.

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