OREANDA-NEWS. Fitch Ratings today published the 2015 edition of its 'High Yield Healthcare Checkup' a comprehensive analysis of large companies in the leveraged finance healthcare sector.

The report profiles 25 companies with a cumulative \$136 billion of high-yield debt in the provider, services, specialty pharmaceutical, medical device and diagnostic sub-sectors. Each company report includes Fitch's analysis of the business profile and capital structure, as well as key selected financial data, a detailed organizational chart, and debt covenant analyses.

The ratings of the companies profiled in the report are clustered in the 'B' and 'BB' categories. Stable liquidity profiles and a decent operating outlook are supportive of the credit profiles. From an operating standpoint, the healthcare industry is facing some persistent secular challenges to revenue growth and profitability in 2015. However, Fitch Ratings' believes that companies will continue to be successful in managing these pressures through cost cutting and targeting faster growth in more profitable geographies and business lines.

Relatively healthy liquidity profiles are also supportive of the credit profiles for many issuers. Most companies in the group are generating cash in excess of reinvestment requirements. The group has a fairly healthy LTM median FCF (CFO minus capital expenditures and dividends) margin of 5.0% and only five companies in this group posted negative FCF in 2014. The median leverage (total debt to EBITDA) is slightly lower at the end of 2014 versus the prior year, dropping from 4.7x to 4.5x. However, leverage will increase in the first half of 2015 as some companies issue debt to fund acquisitions.

Fitch does not expect deleveraging to be a major focus of cash deployment for high-yield healthcare companies during 2015. A certain amount of deleveraging will occur through growth in EBITDA, particularly as companies digest large acquisitions. Although FCF could support debt repayment, given the currently cheap cost of debt capital, Fitch thinks companies are more likely to continue to prioritize acquisitions and shareholder payouts as uses of cash.

While debt maturity schedules are not a significant risk to credit profiles, a few issuers do have sizeable maturities in 2016-2017. Fitch expects companies to continue to be proactive in extending maturity schedules through bank loan amendments and high-yield bond issuance. Many companies are also benefiting from lower cash interest expense and more lenient bank covenant terms following recent refinancing. Fitch expects companies with near-term maturities to be able to refinance the obligations given the presently accommodative stance of bank lenders and bond investors.

The following companies are profiled in the report:

Acelity L.P. Inc.
Alere Inc.
AmSurg Corp.
Catalent, Inc.
Community Health Systems Inc.
DaVita HealthCare Partners Inc.
DJO LLC
Emdeon Inc.
Endo International plc
Envision Healthcare Corp.
HCA Holdings Inc.
HealthSouth Corp.
Hologic Inc.
IASIS Healthcare LLC
Kindred Healthcare Inc.
LifePoint Hospitals, Inc.
Mallinckrodt Pharmaceuticals
MedAssets Inc.
Omnicare Inc.
Quintiles Transnational Holdings Inc.
Select Medical Holdings Corp.
Tenet Healthcare Corp.
Universal Health Services Inc.
Valeant Pharmaceuticals International Inc.
VWR Funding Inc.

The full report 'High Yield Healthcare Checkup' is available at www.fitchratings.com. Fitch's 2015 outlook report for the U.S. healthcare industry is also available.