Irvine-based Smile Brands Group Inc. was hit with its second credit rating downgrade in the past nine months.
Smile, which is privately held, provides business support services for dentists and has some $500 million in annual revenue. Its customer base includes more than 1,300 dentists and dental hygienists practicing in more than 360 offices in 18 states.
New York-based Moody’s Investors Service downgraded Smile’s credit ratings at the start of August.
The ratings agency downgraded Smile to a Caa2 corporate family rating; a Caa2-PD probability of default rating; and a Caa1 senior secured bank credit facility rating, and added that its outlook on Smile was negative.
The recent action follows a similar one in December by Moody’s.
Companies with Caa ratings are “judged to be speculative of poor standing and subject to very high default risk” in Moody’s rating system.
And those with Caa-PD ratings “may be in default on some but not all of their long-term debt obligations,” according to Moody’s.
Smile did not respond to requests for comment.
Moody’s said it expected Smile’s majority owner, New York-based private equity firm Welsh, Carson, Anderson & Stowe, to provide an equity capital infusion, as well as obtain a waiver or amendment to its credit facilities’ financial covenants.
Moody’s also credited Smile as “one of the largest dental service organizations in the United States, maintaining leading competitive positions across many of its primary markets.”
Smile grew out of a company called Bright Now Dental Inc., which was co-founded by Richard Matros, now chief executive of Irvine-based Sabra Health Care REIT Inc., and Steven Bilt.
Bilt left Smile at the end of 2013 and has resurfaced with OneSmile LLC, a new dental business services company backed by San Francisco-based Gryphon Investors, an original Smile investor (see Health column, page 80).
