Gem Acquisition Inc., Genex Holdings Off CreditWatch, #B# Ratings Outlook Stable

Stocks and Financial Services Press Releases Tuesday February 27, 2018 09:20
NEW YORK--27 Feb--S&P Global Ratings

NEW YORK (S&P Global Ratings) Feb. 26, 2018--, S&P Global Ratings said today it affirmed its 'B' long-term issuer credit ratings on managed care firm Gem Acquisition Inc. and intermediate holding company GENEX Holdings Inc. (collectively Genex) and removed them from CreditWatch Negative, where they were initially placed February 9th . The outlook is stable.

At the same time, we assigned Genex's proposed $415 million first-lien credit facility ($50 million revolver due in 2023 and $365 million first-lien debt due in 2025) our 'B' debt rating with a recovery rating of '3'. We also assigned the proposed $120 million second-lien term loan due in 2026 our 'CCC+' debt rating with a recovery rating of '6'.

Genex's recapitalization and ownership change does not materially change our view of its credit profile. Leverage increases very slightly post transaction, but we expect credit protection measures to remain within our rating expectations.

Stone Point had previously owned Genex from 2007-2014 when Genex expanded its business services and grew revenues to $395 million from $189 million. We expect no major change in Genex's strategy, as we believe it will continue to focus on organic growth opportunities and look for small tuck-in acquisitions that could complement its current service offering.

The stable outlook on Genex reflects our expectation that the company will retain its major client base and successfully integrate newly acquired businesses that will foster steady revenue growth in the mid-single digits in the next two years. We also expect EBITDA margins to remain steady in 2018 with leverage in the 6.7x-7.2x range in 2018 and EBITDA coverage above 2x.

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