S&P Global Ratings flagged NMC Health PLC for a possible downgrade after reports that its largest shareholders sold some of their holdings.
The credit rating agency changed its outlook on NMC Health's BB+ rating to negative, indicating that it could be downgraded in the future. The outlook revision follows a sharp decline in the Middle Eastern healthcare services provider's stock price following a stake sale in the company by Vice Chairman Khaleefa Al Muhairi and second-largest shareholder Saeed Al Qebaisi.
The sale came after a report by U.S. short-selling firm Muddy Waters LLC last month, accusing the company of a number of deficiencies. NMC responded to the report at the time by starting an independent third-party review of its business, though denied any wrongdoing on its part — calling the report false and misleading.
S&P Ratings said the developments are likely to distract day-to-day management and add uncertainty to the company's future direction. The sale in particular can cause a change in the company's board and hence, a change in strategy.
"We believe the allegations and the sale could impair the company's access to financial markets and create additional uncertainty about its future direction and governance," the rating agency said.
In its assessment of the company's business profile, the credit agency said NMC has a strong, long-standing reputation in the Middle East and receives its income from a diverse range of sources, although it is somewhat affected by private- and government-funded health care schemes.
S&P Global Ratings expects NMC to continue making $180 million to $250 million of free operating cash flow in 2020 and 2021, which lines up with the BB+ rating.
The company's rating will be downgraded if the company faces accounting issues, fraudulent activities or big changes to financial expectations in the next yearly results.
S&P Global Ratings may revise the outlook to stable if the independent review deems NMC's accounting problem-free and the company's management is unaffected by recent events. The outlook may also be revised if NMC can generate positive free operating cash flow.
This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings. Descriptions in this news article were not prepared by S&P Global Ratings.