S&P lifts Sabra notes, loans, preferreds

Standard & Poor's said it raised its corporate credit rating on Sabra Health Care REIT Inc. to BB- from B+.

The outlook is stable.

At the same time, the agency raised its issue-level rating on the senior unsecured notes issued by Sabra's wholly owned subsidiaries, Sabra Health Care LP and Sabra Capital Corp., to BB from BB-. The recovery rating on this debt remains 2, indicating an expectation for a substantial (70% to 90%) recovery in the event of payment default.

S&P also raised its issue-level rating on the company's revolving credit facility to BB from BB- and the issue-level rating on its preferred stock to B- from CCC+.

"Our BB- corporate credit rating on Sabra reflects our view that the company's business risk profile is ‘weak’ and its financial risk profile is ‘significant.’ Our business risk assessment reflects Sabra's smaller size (undepreciated real estate investments of approximately $1.7 billion), concentrated tenant base (top two tenants contribute nearly 54% of revenues), and improving but continued heavy reliance on skilled nursing/post-acute facilities (SNFs), which contribute approximately 54% of Sabra's revenue," S&P credit analyst Michael Souers said in a news release.

"We note that this asset concentration remains dependent on potentially volatile government reimbursement programs such as Medicare and Medicaid. In late July, the Centers for Medicare & Medicaid Services (CMS) finalized their 2015 payment and policy changes, with skilled nursing facilities set to receive a $750 million (2%) increase in Medicare payments."

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