Magellan Health Inc. Ratings Placed On CreditWatch Positive On Announced Sale Of Its Managed-Care Operations
- Magellan Health Inc. (MGLN) has announced an agreement to sell its managed-care operations to Molina Healthcare.
- As a result, we are placing all of our ratings on MGLN, including the 'BB+' issuer credit rating, on CreditWatch with positive implications.
- The CreditWatch listing reflects our expectation that MGLN's financial risk profile will show material improvements due to the proceeds upon the close of the transaction.
NEW YORK (S&P Global Ratings) May 4, 2020-- S&P Global Ratings said today it placed its ratings, including its 'BB+' issuer credit rating along with its debt ratings, on Magellan Health Inc. (MGLN) on CreditWatch with positive implications.
The CreditWatch placement follow's MGLN's announcement that it is selling its managed-care operation, Magellan Complete Care (MCC), to Molina Healthcare. We believe that, upon transaction close (expected by first-quarter 2021), MGLN's financial profile will likely improve materially due to proceeds from the sale. In exchange for the divested business, Magellan is receiving $850 million (before taxes and expenses), as well as an amount equal to any excess capital above regulatory requirements at MCC subsidiaries at closing (about $75 million at year-end 2019).
The CreditWatch placement reflects our expectation that MGLN's financial profile will show material improvements upon the close of the transaction from sale proceeds. We could raise the ratings by one notch at the time of sale (in first-quarter 2021) if MGLN deploys sale proceeds so that leverage falls at least below S&PGR adjusted levels of 2x, and we expect (based on financial policy and earnings momentum) that it will sustain this improvement. We could affirm the rating at transaction close or earlier if we think MGLN will not be able to maintain leverage below 2x, or if its current fair business assessment weakens materially through organic contractions or reduced profitability.
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- General Criteria: Use Of CreditWatch And Outlooks, Sept. 14, 2009
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Global-scale credit rating(s) issued by S&P Global Ratings' affiliates based in the following jurisdictions [To read more, visit Endorsement of Credit Ratings] have been endorsed into the EU and/or the UK in accordance with the relevant CRA regulations. Note: Endorsements for U.S. Public Finance global-scale credit ratings are done per request. To review the endorsement status by credit rating, visit the spglobal.com/ratings website and search for the rated entity.
| Primary Credit Analyst: | Julie L Herman, New York (1) 212-438-3079; julie.herman@spglobal.com |
| Secondary Contact: | Joseph N Marinucci, New York (1) 212-438-2012; joseph.marinucci@spglobal.com |
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