NEW YORK -- Standard & Poor's, Fitch and Moody's placed their ratings on health insurer Coventry Health Care Inc. on review for possible upgrade after Aetna agreed to buy the insurer for about $5.7 billion.
While none of the firms upgraded their ratings on Coventry, the revised outlooks mean they have a more positive view of the company's credit. Coventry has about $1.6 billion in debt.
Standard & Poor's analyst James Sung said the firm will likely raise its credit rating on Coventry within the next year.
"The outlook revision to positive from stable reflects our view that Coventry's credit quality will improve as a result of its acquisition by Aetna Inc., a significantly larger organization with a higher rating," Sung said.
S&P has a rating of `BBB-' on Coventry's credit, while Fitch maintains a rating of `BBB' and Moody's a `Baa3' rating. All three ratings are investment grade. The S&P and Moody's ratings are only one notch above non-investment grade or "junk" status, and Fitch's rating is two notches above junk status.
Aetna said it will buy Coventry for about $42.08 per share in cash and stock, and the deal will bolster Aetna's Medicaid and Medicare coverage. The purchase is expected to close in about a year.