Cotiviti Corp. Ratings Placed On CreditWatch Negative On Announced Acquisition By Verscend And Rising Refinancing Risk

Stocks and Financial Services Press Releases Wednesday June 20, 2018 09:40
NEW YORK--20 Jun--S&P Global Ratings

NEW YORK (S&P Global Ratings) June 19, 2018--S&P Global Ratings today placed its 'BB-' corporate credit rating on Cotiviti Corp. on CreditWatch with negative implications, meaning we could lower the rating upon further information.

At the same time, we placed our 'BB' issue-level rating on Cotiviti's first-lien debt on CreditWatch with negative implications.

The CreditWatch placement follows the announcement that lower-rated Verscend Technologies Inc. plans to acquire Cotiviti, a leading provider of audit and recovery services. Our ratings on Verscend, incorporate the company's leverage in the mid-8x and aggressive financial policies under its financial sponsor ownership, among other factors.

The transaction values Cotiviti at approximately $4.9 billion and represents a 32% premium to the unaffected share price as of June 4, 2018, and a 136% premium to the initial public offering price of Cotiviti's common stock. This valuation represents a multiple of approximately 15.5x Cotiviti's adjusted EBITDA for the 12 months ended March 31, 2018. We expect the transaction will close by the fourth quarter 2018.

We will resolve the CreditWatch placement after we assess the acquisition's impact on Cotiviti's capital structure, as well as the strategic integration between Verscend Technologies Inc. and Cotiviti Corp. and its new subsidiary. We expect the ratings to be lower by one or more notches upon close of the transaction; however, we could also discontinue the ratings if all of the debt is repaid.

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