OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has downgraded the Financial Strength Rating (FSR) to B (Fair) from B++ (Good) and the Long-Term Issuer Credit Rating (Long-Term ICR) to “bb+” (Fair) from “bbb” (Good) of Western Dental Services, Inc. (Western Dental) (Orange, CA). The outlook of the Long-Term ICR has been revised to negative from stable, while the outlook of the FSR is stable. Concurrently, AM Best has withdrawn these ratings as the company has requested to no longer participate in AM Best’s interactive rating process. This rating action serves as AM Best’s final rating update for Western Dental.
The Credit Ratings (ratings) reflect Western Dental’s balance sheet strength, which AM Best assesses as adequate, as well as its adequate operating performance, neutral business profile and marginal enterprise risk management.
Western Dental is a wholly owned subsidiary of Premier Dental Services Inc. (PDS) and its ultimate parent is NMP III Continuation Fund, LP, a private equity group. Elevated financial leverage at PDS historically has had a negative impact on the ratings of Western Dental.
Prior to the withdrawals, the downgrade of the ratings is primarily due to the significant deterioration in risk-adjusted capitalization resulting from a $44 million net loss reported in 2023. The driver of the losses is a material decline in revenues as expenses have remained relatively flat. Net losses continued into 2024 with a reported loss of almost $10 million for the first quarter. The negative Long-Term ICR outlook reflects the uncertainty of near-term improvement in risk-adjusted capital given continued losses in 2024 and no capital contributions through the first quarter of 2024. Additionally, the financial condition of PDS has weakened placing pressure on Western Dental.
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