Research Update: German Health Care Provider GHD Downgraded To 'CCC+' From 'B-' On Unsustainable Capital Structure; Outlook Stable

In our view, GHD Verwaltung GesundHeits GmbH Deutschland's (GHD) homecare division will continue suffer from disruptions induced by the COVID-19 pandemic, in particular with respect to the patient base and treatment pathway, and from structural shortages of medical staff, ultimately affecting revenue and EBITDA. We anticipate low single-digit revenue growth and EBITDA margins deteriorating to 4.5%-5.5%, pushing S&P Global Ratings-adjusted debt to EBITDA materially above 20x (or above 10x excluding the shareholder loan). In light of the structural challenges GHD is facing, we view the current capital structure as unsustainable, as in our view the current debt structure was sized for a more stable operating environment. We therefore lowered our long-term issuer credit rating on GHD to 'CCC+' from 'B-'.

...- In our view, GHD Verwaltung GesundHeits GmbH Deutschland's (GHD) homecare division will continue suffer from disruptions induced by the COVID-19 pandemic, in particular with respect to the patient base and treatment pathway, and from structural shortages of medical staff, ultimately affecting revenue and EBITDA. - We anticipate low single-digit revenue growth and EBITDA margins deteriorating to 4.5%-5.5%, pushing S&P Global Ratings-adjusted debt to EBITDA materially above 20x (or above 10x excluding the shareholder loan). - In light of the structural challenges GHD is facing, we view the current capital structure as unsustainable, as in our view the current debt structure was sized for a more stable operating environment. - We therefore lowered our long-term issuer credit rating on GHD to '###+' from 'B-'. - The stable outlook indicates our expectation of sufficient liquidity over the next 12 months, supported by the absence of refinancing risk, and anticipation of gradual margin improvement....

Research Update