Fitch Rates HCA, Inc.'s Prospective Notes Offering 'BB/RR1'; Outlook Stable

CHICAGO--(BUSINESS WIRE)--Fitch Ratings has assigned a rating of 'BB/RR1' to HCA Inc.'s (HCA) proposed offering of $750 million in senior secured first lien notes due 2020.

Fitch currently rates HCA as follows:

-- Issuer Default Rating (IDR) 'B';

-- Secured Bank Credit Facility 'BB/RR1';

-- First Lien Notes 'BB/RR1';

-- Second Lien Notes 'B+/RR3';

-- Senior Unsecured Notes 'CCC/RR6'.

The Rating Outlook is Stable. Total rated debt as of March 31, 2009, was approximately $26.6 billion.

Fitch expects the proceeds of the debt offering to be used to reduce outstanding indebtedness under HCA's secured term loan facilities, as required by the terms of the senior secured credit facilities. One of Fitch's key concerns regarding the credit is the large amount of debt maturing between 2010 and 2013, including approximately $10 billion in secured term loan borrowings that mature in 2012 and 2013. However, HCA has issued more than $1.8 billion in new first- and second-lien secured notes in 2009 and used the proceeds to repay term loan borrowings, and Fitch believes HCA may undertake similar activity in the future. However, if HCA were unable to proactively address these maturities and Fitch believes the company would be unable to either refinance or retire the obligations when due, a negative ratings action would result.

HCA's ratings reflect the company's significant leverage and challenging industry environment, partially offset by improvements in its operations and debt levels. HCA has reduced outstanding debt by more than $1.8 billion since its leveraged buy-out (LBO) in 2006 while leverage (total debt/EBITDA) has declined to approximately 5.4 times (x) at March 31, 2009 from 6.6x at Dec. 31, 2006. In addition, HCA's operations have continued to improve as a result of cost management efforts, strong same-facility admissions growth (including its seventh consecutive quarter of positive same-facility adjusted admissions growth reported for the second quarter of 2009), and new emergency room coding efforts.

Key rating concerns include the large amount of debt maturing in the next several years, as noted above, as well as an uncertain industry environment. Industry uncertainty stems from the potential for the economic recession to lead to pressure on bad debt expense as well as the potential for health care reform, which could have profound (positive or negative) impact on the sector. Finally, Fitch notes that an exit by HCA's private equity sponsors through, for example, an initial public offering (IPO) could have a significant impact on the credit.

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