Standard & Poor's Corp., a New York-based credit-rating agency, says the outlook for Owings Mills, Md.-based Integrated Health Services' credit is "negative" and cautioned that "there is the potential that a large debt-financed acquisition could lead to a rating downgrade."
Standard & Poor's assigned a B rating to the post-acute-care provider's $250 million senior subordinated notes due 2008. The rating agency also assigned a BB- rating to the company's $1 billion revolving credit facility and its $750 million term loan due 2004. The company's existing BB- corporate credit and bank loan ratings and its B subordinated debt rating were affirmed.
All Standard & Poor's credit ratings of BB+ or under are considered speculative grade. Standard & Poor's says IHS' ratings reflect the company's "aggressive transition toward becoming a full-service alternate-site healthcare provider and its limited cash flow relative to its heavy debt burden."
The rating agency says IHS will be "greatly challenged to control, integrate and further expand operations that were only a quarter of their current size just three years ago."
IHS provides subacute care, home care and other post-acute services through more than 1,000 locations in 45 states. Its pending acquisitions include Rotech Medical Corp., Coram Healthcare Corp.'s lithotripsy division and Community Care of America.
IHS executives declined to comment on Standard & Poor's action.