OREANDA-NEWS. S&P Global Ratings affirmed its 'CCC+' corporate credit rating on home infusion services provider BioScrip Inc. and revised the outlook to stable from negative.

At the same time, we affirmed our 'B-' issue-level rating on the company's senior secured term loan. Our recovery rating on this debt remains '2', indicating our expectation for meaningful (50% to 70%; at the lower end of the range) recovery in the event of a payment default. We also affirmed our 'CCC-' issue-level on the company's senior unsecured notes. The recovery rating on the notes remains '6', reflecting our expectation for negligible (0% to 10%) recovery on this debt in the event of default.

"The outlook revision reflects higher confidence in the company's ability to meet our base case expectations and that it will be able to meet its debt obligations for at least the next 12 months," said credit analyst Elan Nat. "In 2015, the company experienced a significant adverse shift in its product mix toward lower-margin, higher-acuity therapies, as well as an increase in bad debt expense. BioScrip responded to these difficulties with several initiatives, including transitioning its non-core, infusion therapy business to alliance infusion providers and reducing its work force. These initiatives demonstrated some success with margin improvement and now stability over the past several quarters."

The stable rating outlook reflects our expectation that the BioScrip's liquidity position will support the company's debt obligations for at least the next year. The outlook also reflects the company's improving prospects to further stabilize its operating performance.

We would likely lower the rating if adjusted EBITDA (including recurring "one-time" items) in 2016 falls to about $35 million as a result of delays in transitioning its non-core, infusion therapy business to alliance infusion providers, or if liquidity becomes constrained if the company again struggles with managing working capital. In this scenario, we could conclude that the company might not be able to meet its debt obligations within 12 months, possibly leading to a default.

While unlikely over the near term, we could consider an upgrade if BioScrip materially outperforms our expectations and generates at least $70 million of annual EBITDA. Should this occur, we would likely to view the company's capital structure as sustainable. In order for the company to reach this level, it would have to expand margins by about 200 basis points. We do not view this as a likely scenario over the near term.