Covenant Surgical Partners Inc. Ratings Placed On CreditWatch Negative Due To COVID-19-Related Liquidity Issues

  • We expect demand for elective surgical procedures to decline significantly due to the coronavirus pandemic, resulting in sizable losses of revenue and EBITDA for Covenant Surgical Partners Inc. and causing the company's discretionary cash flow deficits to widen in 2020.
  • As a result, we have placed all of our ratings on Covenant, including the 'B-' issuer credit rating, on CreditWatch with negative implications.
  • The CreditWatch placement reflects our view that we could lower our ratings on the company and its debt if we believe the lower demand and adverse impact to its financial performance will extend longer than we currently anticipate and result in liquidity issues.
NEW YORK (S&P Global Ratings) March 25, 2020—S&P Global Ratings today took the rating actions listed above. The CreditWatch placement reflects our view that the coronavirus pandemic could result in significantly lower revenue, EBITDA, and cash flow in 2020 than our prior base-case estimates due to the rapid decline in demand for elective surgical procedures. The U.S. Surgeon General and the American College of Surgeons recommended that elective surgical procedures be postponed to conserve much-needed supplies and safety equipment as well as to limit the spread of COVID-19. Outpatient surgical centers could benefit from the increased shift of inpatient surgical procedures to outpatient settings, though such a benefit is uncertain.
We will be in regular contact with Covenant's management team and will monitor related news to incorporate any new information into our analysis. If we conclude the company is unable to appropriately address cash flow and liquidity issues, among others, we could lower the ratings. Alternatively, we could affirm the ratings if we gain confidence that Covenant's liquidity will remain adequate for at least the next 12 months or if it is able to maintain or improve EBITDA.
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