Moody's Investors Service downgraded its outlook for radiology provider Akumin to “negative” Wednesday amid delays in furnishing key financial documents.
The publicly traded imaging center operator was forced to postpone its second quarter earnings call last month after failing to hit a filing deadline. Until the issue is resolved, Akumin executives have been barred from trading company stock, while creditors cut back the amount on its revolving credit line from $55 million down to $10M.
Akumin has said it plans to file the reports by an Oct. 15 deadline. But if the issue remains unresolved beyond mid-December, it will constitute a default under the Plantation, Florida, firm’s indentures.
“Although Moody's does not expect the company to rely on the revolver in the near term, financial flexibility will be more limited until publication of the missing reports, which would restore revolver capacity if completed by the extended 60-day deadline,” the New York-based ratings agency said Sept. 15. “Any further delay would substantially increase the risk of a default event and weaken Moody's assessment of liquidity and corporate governance.”
Company management and auditors announced the delay Aug. 15, noting the need for “additional information and analysis” before sharing Q2 results. Akumin said the audit pertains to “potential additional credit losses with respect to prior years,” while emphasizing that the firm is not subject to insolvency proceedings. As part of its management cease-trade order with the Ontario Securities Commission (Akumin also holds offices in Toronto), the group has shared bi-weekly updates on its progress, issuing the latest on Sept. 13.
Jeffrey White, director of investor relations at Akumin, noted that the company does not have any amount due on its revolving credit line, and leaders are "confident" about hitting the Oct. 15 filing deadline.
In explaining its ratings rationale, Moody’s said Akumin is constrained by governance risks from its inability to file statements on time, and high leverage—with debt 7 times higher than earnings through 2022. Its “aggressive” growth strategy and exposure to downward pressure on reimbursement pose further risk. However, Akumin also benefits from nationwide presence, large scale, longstanding partnerships with providers and favorable industry trends such as an aging population and shift toward cheaper outpatient imaging.
The firm’s picture is further complicated by its acquisition of Alliance Healthcare Services for $820 million, which closed Sept. 1. Altogether, the combined company will generate $730 million in revenue, operating 154 outpatient imaging locations across 46 states.
“Although Akumin faces heightened execution risk with the Alliance acquisition, the company has a good track record of integrating smaller scale transactions, which will continue to be core to its growth strategy,” Moody’s noted.
Marty Stempniak has covered healthcare since 2012, with his byline appearing in the American Hospital Association's member magazine, Modern Healthcare and McKnight's. Prior to that, he wrote about village government and local business for his hometown newspaper in Oak Park, Illinois. He won a Peter Lisagor and Gold EXCEL awards in 2017 for his coverage of the opioid epidemic.