Following a rise in wage inflation that outpaced reimbursement increases, ASP NAPA Intermediate Holdings LLC (NAPA), a provider of anesthesia services, reported revenue declines of about 9% annually and thin EBITDA margin of 3.5%-5% in 2023 and 2024, and we expect similar results in 2025. Moreover, we believe the company?s dependance on working capital inflow and contract termination payments to generate free cash flow could undermine the viability of its capital structure, especially as we don?t expect those sources to persist once revenues stabilize. Therefore, we lowered the issuer credit rating on NAPA to ?CCC+? from ?B-?. At the same time, we lowered our issue-level rating on the first-lien debt to ?CCC+? from ?B-?. Our recovery rating of ?3? is
