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Investing.com -- Moody’s Ratings has affirmed the B1 corporate family rating (CFR) and B1-PD probability of default rating (PDR) of Ramsay Generale de Sante S.A. (Ramsay Santé), a leading private hospital operator in France and the Nordic countries. The B1 instrument rating on the company’s €1.45 billion senior secured term loan B5, the €100 million senior secured capital spending and acquisition facility, and the €100 million senior secured revolving credit facility (RCF) have also been affirmed. However, the outlook has been revised to negative from stable.
The rating action was triggered by a sustained dip in profitability due to inflationary and regulatory pressures, particularly in France. This has led to a slower-than-anticipated improvement in credit metrics compared to Moody’s earlier projections. The EBITDA margin fell from 15.1% for the full year ended June 2022 to 11.8% for the half-year ended December 2024, mainly due to a significant reduction in subsidies and rising costs, which were not entirely offset by revenue price increases.
In 2024, the EBITDA margin was also affected by the prudential coefficient withholding on French tariffs and reduced subsidies from the French government. Moody’s downgraded France’s rating to Aa3 in December 2024, reflecting its view that the country’s public finances will significantly weaken in the coming years. The real GDP growth is expected to slow to 0.5% in 2025, down from 1.1% in 2024.
For the full year ending June 2025, Moody’s now projects an adjusted EBITA to interest expense ratio of 1.0x, down from the earlier forecast of 1.4x. The adjusted gross debt to EBITDA is projected at 6.4x and Moody’s adjusted free cash flow to debt to remain low at 0.8% for the same period.
To improve profitability, Ramsay Santé is reinforcing cost base restructuring efforts. Despite execution risks, Moody’s anticipates that these measures and lower inflation will increase the adjusted EBITDA margin to over 12% over the next 12 to 18 months. France’s inflation rate is forecasted to be at 1.4% in 2025, compared with 2.3% in 2024.
Ramsay Santé saw positive market dynamics for the half-year ended December 2024. Patient admissions increased in its French hospitals due to post-Covid-19 demand. In the Nordics, stable overall admissions were supported by increased inpatient volumes in Sweden, particularly due to the new maternity unit at St Goran Hospital and steady demand in elderly care and specialist clinics. Ramsay Santé has recently been awarded the renewal of its contract to provide care at St Göran Hospital in Stockholm, starting in 2026 for a minimum of eight years, through its subsidiary Capio.
As of 31 December 2024, Ramsay Santé had a cash balance of €158 million, a committed revolving credit facility of €100 million (of which €30 million was drawn) and a capital spending and acquisition facility of €100 million fully undrawn. Free cash flow generation of about €30 million is forecasted for the financial year ending in June 2025. The company made significant investments in medical equipment, real estate and renovation, digitalization, and reinforcement of cybersecurity. In February 2025, Ramsay Santé repriced its term loans, merging them into a new single term loan B5, maturing in August 2031.
The negative outlook stems from declining profitability in recent quarters and weak credit metrics for a B1 rating. A stable outlook would require sustained revenue growth and profitability improvements to restore stronger credit metrics, such as interest coverage, on a sustainable basis.
Upward rating pressure could arise if the adjusted gross debt to EBITDA falls below 5.5x; the adjusted EBITA to interest expense exceeds 2x; and the adjusted free cash flow to debt improves above 5% - all on a sustainable basis. Conversely, downward rating pressure could develop if the company fails to deleverage below adjusted gross debt to EBITDA of 6.5x; if the adjusted EBITA to interest expense does not move towards 1.5x; or adjusted free cash flow turns negative - all on a sustained basis. Negative rating pressure could also occur in the event of large debt-financed acquisitions, distributions to shareholders or if liquidity materially deteriorates.
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