Moody's downgrades Service Corp. ratings
NEW YORK (AP) — Moody's Investors Service on Monday cut Service Corp. International Inc.'s corporate family rating to "Ba3" from "Ba2," citing the additional debt the company will take on to finance its acquisition of rival Stewart Enterprises Inc.
The $1.13 billion deal, announced late last month, will combine the two largest funeral home and cemetery operators in the United States. The combined company will operate 1,653 funeral homes and 515 cemeteries in the U.S., Canada and Puerto Rico. Service Corp. currently runs 1,437 funeral homes and 374 cemeteries.
Moody's also on Monday reduced Service Corp.'s probability of default rating to "Ba3" from "Ba2." The ratings outlook is stable and the moves conclude the review Moody's began on May 29.
Moody's said that with the combined company's scale in its industry, it's debt levels and financial profile will be in line with the "Ba3" rating level.
The rating also factors in the relatively lengthy period of time before the acquisition can go into effect, during which time the two companies will operating separately, with any acquisition-related cost reductions unlikely to kick in until 2014, Moody's said.
Shares of Houston-based Service Corp. rose 9 cents to $17.90 in afternoon trading.