ProMedica Health's HCR acquisition pressures its rating

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Ohio-based ProMedica Health System faces rating pressure from its acquisition of the operations of HCR ManorCare.

Moody’s Investors Service has placed the ProMedica system’s A1 rating on review for downgrade. The system has roughly $420 million of debt.

The transaction will cost the system roughly $1.1 billion and is expected to close within the next two weeks.

The rating agency said that while the pending acquisition would double ProMedica's $3 billion revenue base and expand post-acute and long-term care operations, it would also add to the system’s leverage and significantly dilute balance sheet and liquidity metrics.

“The review will consider the final terms of the transaction and bridge financing, consolidated financial projections, proforma liquidity profile, and subsequent expected permanent financing,” Moody’s said.

On April 25, 2018, ProMedica entered into a definitive agreement to acquire the operations of Toledo, Ohio-based HCR.

HCR has more than 50,000 employees providing services in 450 assisted living facilities, skilled nursing and rehabilitation centers, memory care communities, outpatient rehabilitation clinics, and hospice and home health agencies operating under the names of Heartland, ManorCare Health Services and Arden Courts.

ProMedica, which operates in six states, said the acquisition would expand its footprint into 30 states, employing approximately 70,000 people with projected annual revenues of $7 billion.

HCR ManorCare had filed for bankruptcy in March, as it struggled to keep up with rent payments amid declining Medicare reimbursements. Quality Care Properties, a Maryland-based real estate investment trust, acquired HCR ManorCare earlier this month.

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