Research: Rating Action: Moody’s Assigns B2 to TEAM Services Group, LLC’s Additional Senior Term Loan

New York, August 22, 2022 — Moody’s Investors Service (“Moody’s”) has assigned a B2 rating to the $100 million senior secured term loan from TEAM Services Group, LLC (“TEAM”). All other ratings, including B3 Corporate Family (CFR) rating, B3-PD probability of default rating, B2 ratings on existing secured senior bank credit facilities and Caa2 rating on secured term loan senior second tier, remain unchanged. The outlook is stable.

Proceeds from the additional senior term loan will be used to fund acquisitions that are signed under a purchase agreement in addition to acquisitions under a letter of intent, add cash to the balance sheet to future acquisitions, as well as pay fees and expenses. The additional funding is credit negative as it will increase leverage to approximately 7x on a Moody’s adjusted basis. Despite the increase in debt, the company’s operational performance has been good since the beginning of the year with double-digit organic growth in revenues and EBITDA. Moody’s expects earnings growth to continue so leverage will improve to the 6x low range over the next 12-18 months.

Duties:

..Issuer: TEAM Services Group, LLC

….Gtd Senior Secured 1st Privilege Term Loan, Affected B2 (LGD3)

LGD adjustments:

..Issuer: TEAM Services Group, LLC

….Gtd Senior Secured 2nd Privil Term Loan, Adjusted to (LGD6) from (LGD5)

RATINGS RATIONALE

TEAM’s B3 CFR reflects Moody’s expectation that the company will continue to operate with high adjusted debt/EBITDA for the next 12-18 months. Pro forma for the additional $100 million term loan top-up, Moody’s estimates TEAM’s Adjusted Debt/EBITDA to be approximately 7x based on the LTM ending June 30, 2022. Additionally, the rating is limited by the moderate scale of the business and its geographic concentration in four states – California, Colorado, Georgia and Pennsylvania, although a single state (California) accounts for more than 10% of total revenue. The rating also reflects Moody’s expectation that TEAM will aggressively pursue follow-on acquisitions using proceeds from the addition of additional term loan. Moody’s further expects the company to operate with aggressive financial policies typical of private equity-backed companies.

The B3 CFR is supported by the diversification of the business by services and payers. Despite broad exposure to Medicaid reimbursement rates, TEAM enjoys isolation given the state-by-state nature of reimbursement changes. Exposure may also be mitigated as TEAM expands into other states. The rating is supported by the growing demand for long-term care at home, the preference for the BYOC (bring your own caregiver) model, particularly during the current period of caregiver labor shortages, and long-term contractual relationships. term. Revenue comes from administrative fees in the Risk Management Strategies (RMS) business and either from a variance between state Medicaid reimbursement rates and caregiver compensation or from administrative fees in the TEAM Public business Choices (TPC). Over the next 12 to 18 months, Moody’s expects the company to maintain good liquidity, evidenced by positive free cash flow generation.

Moody’s expects the company to maintain good liquidity over the next 12 months given the company’s access to a $35 million undrawn revolving credit facility and expected cash flow generation. available positive. Liquidity is also supported by the company’s good cash balance as well as significant flexibility in the credit agreement, including the absence of financial preservation clauses in the term loans.

TEAM faces social risks, such as growing concerns about access to and affordability of health services. However, compared to many other rated healthcare companies, TEAM faces below average social risk, as the company serves the elderly and people with disabilities, which represents a defended group with a legislative orientation, political, media and regulatory. That said, given the high percentage of TEAM’s revenue generated by Medicaid, the company is exposed to reimbursement changes. In terms of governance, TEAM’s acquisitions have generally been financed with debt, which poses a future risk for creditors, although the company’s sponsors have shown a willingness to partially finance larger transactions with equity such as than 24Hr Home Care.

The stable outlook reflects Moody’s view that the company will continue to grow both organically and through acquisitions, but this leverage will remain high.

FACTORS THAT MAY LEAD TO AN IMPROVEMENT OR DEGRADATION OF THE RATING

Ratings could be downgraded if TEAM’s revenue or profitability weakens or if the company fails to effectively manage its rapid growth. A downgrade could also occur with negative changes in Medicaid reimbursement rates or if company financial policies become more aggressive. Ratings could also be downgraded if liquidity erodes.

Ratings could be upgraded if TEAM continues to successfully execute its acquisition growth strategy leading to scale improvement, generates a track record of consistent positive free cash flow and a debt to EBITDA ratio below 6.0 time.

TEAM Services Group, LLC is a leading provider of employment administration and risk management solutions that facilitate self-managed home care for seniors and people with long-term disabilities. TEAM is owned by a continuation fund managed by private equity firm Alpine Investors. TEAM generated approximately $650 million in contract revenue in the last twelve months ending June 30, 2022.

The main methodology used in this rating is that of business and consumer services published in November 2021 and available on https://ratings.moodys.com/api/rmc-documents/356424. Otherwise, please see the Scoring Methodologies page on https://ratings.moodys.com for a copy of this methodology.

REGULATORY INFORMATION

For details on key rating assumptions and Moody’s sensitivity analysis, see the Methodological Assumptions and Sensitivity to Assumptions sections in the Disclosure Form. Moody’s rating symbols and definitions can be found at https://ratings.moodys.com/rating-definitions.

For ratings issued on a program, series, category/class of debt or security, this announcement provides certain regulatory information regarding each rating of a subsequently issued bond or note of the same series, category/class of debt, security or under a program for which ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a media provider, this announcement provides certain regulatory information relating to the credit rating action on the media provider and each particular credit rating action for securities whose credit ratings are derived from the support provider’s credit rating. For the provisional ratings, this press release provides certain regulatory information relating to the provisional rating assigned, and to a final rating that may be assigned after the final issuance of the debt, in each case where the structure and conditions of the transaction n have not changed prior to the final rating being assigned in a way that would have affected the rating. For more information, please see the issuer/transaction page of the respective issuer at https://ratings.moodys.com.

For all relevant securities or rated entities receiving direct credit support from the lead entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action , the associated regulatory information will be that of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to the jurisdiction: Ancillary services, Disclosures to the rated entity, Disclosures to be provided by the rated entity.

The rating has been communicated to the rated entity or its designated agent(s) and issued without modification as a result of such communication.

This rating is requested. Please refer to Moody’s Policy for the Designation and Assignment of Unsolicited Credit Ratings available on its website. https://ratings.moodys.com.

The regulatory information contained in this press release applies to the credit rating and, if applicable, the outlook or rating revision relating thereto.

Moody’s general principles for assessing environmental, social and governance (ESG) risks in our credit analysis are available at https://ratings.moodys.com/documents/PBC_1288235.

The worldwide credit rating on this credit rating announcement was issued by one of Moody’s affiliates outside the EU and is approved by Moody’s Deutschland GmbH, An der Welle 5, Frankfurt am Main. -le-Main 60322, Germany, in accordance with Article 4(3) of Regulation (EC) No 1060/2009 on credit rating agencies. Further information on the EU approval status and the Moody’s office that issued the credit rating can be found at https://ratings.moodys.com.

The worldwide credit rating on this credit rating announcement has been issued by one of Moody’s affiliates outside the UK and is approved by Moody’s Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the United Kingdom. . Further information on the UK endorsement status and the Moody’s office that issued the credit rating can be found at https://ratings.moodys.com

Please see https://ratings.moodys.com for any updates on changes to the lead rating analyst and Moody’s legal entity that issued the rating.

Please see the issuer/transaction page at https://ratings.moodys.com for additional regulatory information for each credit rating.

David Locker
Analyst
Corporate Finance Group
Moody’s Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
UNITED STATES
JOURNALISTS: 1 212 553 0376
Customer service: 1 212 553 1653

Ola Hannoun-Costa
Associate General Manager
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Customer service: 1 212 553 1653

Release Office:
Moody’s Investors Service, Inc.
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UNITED STATES
JOURNALISTS: 1 212 553 0376
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