Research Update: ASP NAPA Intermediate Holdings LLC Outlook Revised To Negative; 'B' Rating Affirmed

ASP NAPA Intermediate Holdings LLC underperformed our expectations during the first nine months of 2022 due to sharply higher clinician compensation rates, soft volume at its client sites, and integration challenges and client losses from its American Anesthesiology acquisition that resulted in sizable free operating cash flow (FOCF) deficits. We see these operational challenges continuing into the first half of 2023 before we expect meaningful improvement. We estimate S&P Global Ratings-adjusted debt to EBITDA leverage increased to around 11.5x in 2022. However, we believe the company's ongoing efforts to renegotiate client contracts, including receiving initial and/or increased subsidies should improve its profitability and result in a leverage decline to about 7.4x in 2023. We affirmed our 'B' issuer credit rating

...- ASP NAPA Intermediate Holdings LLC underperformed our expectations during the first nine months of 2022 due to sharply higher clinician compensation rates, soft volume at its client sites, and integration challenges and client losses from its American Anesthesiology acquisition that resulted in sizable free operating cash flow (FOCF) deficits. We see these operational challenges continuing into the first half of 2023 before we expect meaningful improvement. - We estimate S&P Global Ratings-adjusted debt to EBITDA leverage increased to around 11.5x in 2022. However, we believe the company's ongoing efforts to renegotiate client contracts, including receiving initial and/or increased subsidies should improve its profitability and result in a leverage decline to about 7.4x in 2023. - We affirmed our 'B' issuer credit rating on the company and revised our outlook to negative from stable. Our issue-level ratings, including our 'B' issue-level rating on its first-lien term loan with a '3' recovery...

Research Update