The perilous financial situation of Air Methods has been recognized for some significant time and was more a matter of timing than likelihood. The Wall Street Journal wrote about it nine months ago (as did others), but it was all still a distant outcome. There are a number of other heavily leveraged companies out there in similar circumstances.
More Companies Slapped With Low Credit Ratings
By
Matt Grossman
An Air Methods medical helicopter. (Air Methods)
A rising share of companies are landing at the lower end of the credit-rating scale, Moody's Investors Service said in a new report.
Of the junk-tier businesses it scans, 14% had credit ratings of no higher than B3 with a negative outlook at the end of last year, Moody's said. That proportion grew by 25% from a quarter earlier. (A B3 from Moody's is six notches below investment grade.)
Downgrades have been accelerating in recent months as a darkening economic outlook dims expectations for corporate earnings at the same time that rising interest rates threaten to make borrowing more expensive.
Healthcare companies in particular are seeing their creditworthiness deteriorate, Moody's said. They have made up the largest share of companies recently downgraded to B3 with a negative outlook or worse.
Late last year,
Moody's downgraded Air Methods to Caa3 from B3. It projected the emergency air-medical transport company's debt load will reach nearly 12 times its earnings before interest, taxes, depreciation and amortization over the next 12 to 18 months—up from a recent ratio of 9.2 times.
Air Methods bonds due in 2025 have traded as cheaply as 5 cents on the dollar this year, according to MarketAxess data. The company didn't respond to an inquiry.
Note: Caa3 rating is "Obligations rated Caa are judged to be of poor standing and are subject to very high credit risk". Caa3 is the lowest of this class of rating.