Moody’s Investors Service, New York, has cut its rating on senior unsecured debt issued by Health Net Inc., Los Angeles.[@@]
The move will lower the rating on the debt to Ba1, from Baa3, and it will increase the interest rate on the company’s senior notes to 9.875%, from 8.375%, Health Net says.
Moody’s estimates the rate cut affects about $400 million in debt.
Health Net provides or administers health coverage for 5.2 million people.
The downgrade is “the result of a higher degree of uncertainty with respect to Health Net’s earnings and membership over the next several quarters as well as the reduced financial flexibility of the company,” Moody’s says in a comment on the rate cut.
Health Net reported higher than expected hospital costs in California for the first quarter, and it also reported higher costs in the Northeast, Moody’s says.