Investing.com -- Moody’s Ratings has downgraded the corporate family rating (CFR) of AMN Healthcare, Inc. (AMN) to Ba3 from Ba2, along with a downgrade of the probability of default rating to Ba3-PD from Ba2-PD. The ratings on the company’s senior unsecured notes have also been dropped to B1 from Ba3. Simultaneously, the outlook for the company has been revised to negative from stable. Notably, AMN’s speculative grade liquidity rating of SGL-1 remains unchanged.
The downgrade comes as a result of AMN’s deteriorating credit metrics, with revenues experiencing a structural decline due to reduced demand in the nurse staffing industry. The bill-pay spread continues to compress, leading to a debt-to-EBITDA ratio of 3.8x as of the last twelve months ending March 31, 2025. This ratio is projected to increase through the end of 2025. Despite the rising leverage, AMN is expected to maintain good cushions on its covenants and maintain strong liquidity. The company has implemented various cost-cutting initiatives, including reducing its workforce, but these steps have not been sufficient to counteract the margin compression and decline in demand.
The Ba3 CFR reflects AMN’s leading position in the temporary healthcare staffing industry, its strong free cash flow, and very good liquidity. However, the rating is constrained by a business model that is sensitive to a number of factors that could negatively impact the broader healthcare services industry. These factors include high inflation, a shortage of healthcare professionals, defensive strategies from key customers, and potential regulatory actions to curb rapidly increasing healthcare expenses. The rating also takes into account the expectation that the debt-to-EBITDA ratio will remain above 4x over the next 12-18 months.
AMN’s profitability is expected to continue normalizing over the next 12 months as the company continues to cut costs to offset the decline in demand. The company’s nurse and allied solutions business, which is cyclical and still represents a majority of the company’s revenue, has seen a decrease in concentration in recent years, which should help stabilize margins.
AMN’s ratings are supported by its very good liquidity (SGL-1). As of March 31, 2025, the company had $56 million in cash and approximately $580 million available under its $750 million revolving credit facility, which expires in February 2028. The company is also expected to generate between $100-$125 million in free cash flow over the next 12 months and will remain in compliance with its first lien net leverage covenant over this period.
The B1 rating on the senior unsecured notes ($350 million due 2029; and $500 million due 2027) is a notch below the Ba3 CFR, reflecting their junior position in the capital structure compared to the senior secured $750 million revolver. This revolver is secured by substantially all of the company’s assets and is guaranteed by the company’s subsidiaries.
The negative outlook reflects the expectation that financial leverage will rise and remain elevated as the company continues to face declining sales.
The ratings could be upgraded if the company returns to revenue growth and profitability, follows a conservative financial policy, and expands its scale and diversification while keeping Debt/EBITDA below 3.25 times. Conversely, the ratings could be downgraded if AMN’s debt/EBITDA is expected to exceed 4.25 times, if the company adopts a more aggressive acquisition strategy or financial policy, or if there is a weakening of liquidity or sustained decline in free cash flow.
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