TEXT-S&P affirms BioScrip

(The following statement was released by the rating agency)

-- Elmsford, N.Y.-based BioScrip expects to sell certain assets of its community specialty pharmacies and centralized specialty and mail-service pharmacy businesses to Walgreens Co. within the next few months for approximately $225 million. -- BioScrip's ongoing revenues will be higher margined, but will be reduced by about two-thirds, and will depend more on its remaining infusion and home health operations. -- The timing and success of the redeployment of proceeds from the divestiture are uncertain. -- We are affirming our low-speculative-grade 'B' corporate credit and 'B-' senior unsecured debt ratings on the company, and the rating outlook remains stable. NEW YORK (Standard & Poor's) Feb. 3, 2012--Standard & Poor's Ratings Services said today that it is affirming its ratings on Elmsford, N.Y.-based BioScrip Inc., including its 'B' corporate credit rating, following the company's announcement that it is selling specialty pharmacy businesses that generate about two-thirds of current revenues. The outlook is stable. "The sale of its low-margined specialty pharmacy businesses does not change our assessment of BioScrip's business risk profile as 'vulnerable' (as we define the term in our criteria)," said Standard & Poor's credit analyst Michael Kaplan. The company's revenue base will be reduced to about two-thirds of its current size, making it more subject to the uncertain developments in its remaining infusion and home health operations. "The pace and success of new investment in these areas, and the extent to which proceeds from asset sales are used to reduce debt, could well influence any eventual changes in our perception of the company's financial risk profile," added Mr. Kaplan, "which we still consider 'highly leveraged' (as defined in our criteria)." The stable outlook is based on the company's still-vulnerable business risk profile that is unlikely to change in the coming year. The uncertain pace and success of BioScrip's attempt to redeploy capital creates a range of possibilities for its revenue growth and margin prospects over the next few years. Still, in the year ahead, it is highly unlikely that the company will establish an operating record that suggests a meaningful improvement in our vulnerable business risk profile assessment. Accordingly, we believe that our increased confidence that the company has the ability and willingness to maintain what we would consider an "aggressive" financial risk profile (as defined in our criteria), rather than a highly leveraged one, would be the most likely reason for upgrading the company. Ratios indicative of an improved financial risk profile would likely include funds from operations/debt of sustainably above 12%, and debt/EBITDA maintained below 5x. This could reflect overhead reductions in the wake of the divestitures, and the use of proceeds from assets sales to reduce debt. We believe a lowering of the already low-speculative-grade rating is unlikely, given the company's plan to invest in higher margined operations than those divested, and the likelihood that liquidity will be augmented with proceeds to be received at the close of the transaction. (Caryn Trokie, New York Ratings Unit)