Research Update: Heartland Dental LLC Ratings Affirmed On Improved Scale, Cost Management; Outlook Stable

We expect Heartland Dental LLC's leverage to remain somewhat elevated at about 10x in 2022 as macroeconomic hurdles, increasing inflation, and rising interesting rates pressure the company's EBITDA margin and cash flow generation. However, we believe Heartland's significant increase in scale over the past few years provides additional negotiating power with suppliers and payers, enabling more efficient cost management. In addition, we project Heartland's leverage will improve to about 9x in 2023 with break-even free operating cash flow (FOCF) as macroeconomic pressures gradually abate. Therefore, we affirmed our 'B-' issuer credit rating on Heartland Dental, 'B-' issue-level rating on its first-lien debt, and 'CCC' rating on its senior unsecured notes. Our stable outlook reflects our expectation that 2023 adjusted leverage

...- We expect Heartland Dental LLC's leverage to remain somewhat elevated at about 10x in 2022 as macroeconomic hurdles, increasing inflation, and rising interesting rates pressure the company's EBITDA margin and cash flow generation. However, we believe Heartland's significant increase in scale over the past few years provides additional negotiating power with suppliers and payers, enabling more efficient cost management. - In addition, we project Heartland's leverage will improve to about 9x in 2023 with break-even free operating cash flow (FOCF) as macroeconomic pressures gradually abate. Therefore, we affirmed our 'B-' issuer credit rating on Heartland Dental, 'B-' issue-level rating on its first-lien debt, and '###' rating on its senior unsecured notes. - Our stable outlook reflects our expectation that 2023 adjusted leverage will be below 10x, supported by improved EBITDA through better cost control than 2022 and continued maturation of new offices. It also reflects our expectation...

Research Update