Research: Rating Action: Moody’s Revises Upstream Newco, Inc. Outlook from Positive to Stable, Ratings Confirmed at B3


New York, July 19, 2022 — Moody’s Investors Service (“Moody’s”) has revised Upstream Newco, Inc.’s (“Upstream”) outlook to positive from stable. At the same time, Moody’s affirmed the B3 Corporate Family (CFR) rating, the B3-PD probability of default rating, the B2 rating on the senior secured credit facility and the Caa2 rating on the junior term loan. rank.

The stabilizing outlook reflects Moody’s expectation that Upstream’s financial leverage will remain elevated over the next 12 to 18 months, reducing the likelihood of an upgrade. This reflects industry headwinds including labor pressures and rising interest rates following the company’s acquisition of Results Physiotherapy in 2021. The industry has been somewhat impacted by wage inflation, and while volume recovery has been solid as the severity of the pandemic has subsided compared to mid-2020, there is a risk to volumes if the U.S. economic environment weakens. Governance is a factor in this rating action, as Upstream has continued to use high leverage to fund small add-on deals. The debt/EBITDA ratio as of March 31, 2022 was 7.9x. Moody’s expects leverage to improve as the upstream completes the integration of recent acquisitions and continues to gain size and density in markets, but at a slower pace than Moody’s previous expectations.

The B3 CFR’s assertion reflects Moody’s view that demand for physical therapy services will remain strong, supported by generally stable utilization trends through most of the ongoing pandemic.

Moody’s took the following rating actions:


..Issuer: Upstream Newco, Inc.

…. Classification of the family of companies, Confirmed B3

…. Probability of default rating, confirmed B3-PD

….Revolving Senior Secured Senior Revolving Credit Facility, Committed B2 (LGD3)

….Senior Secured 1st Privilege Term Loan, Affirmed B2 (LGD3)

….Senior Secured 2nd Privil Term Loan, Caa2 confirmed (LGD5)

Outlook Actions:

..Issuer: Upstream Newco, Inc.

….Outlook, changed to stable from positive


Upstream’s B3 corporate family rating reflects its high leverage at 7.9x. The rating also reflects the company’s rapid expansion strategy, which grows primarily through the opening of new clinics. The rating is limited by the low barriers to entry into the physical therapy industry and the risk of market oversaturation given the rapid expansion plans of Upstream and many of its competitors. This rating is underpinned by Upstream’s strong track record of growing same-store sales and managing expansion and acquisition of new clinics. Moody’s expects demand for physiotherapy to continue to grow given that it is relatively inexpensive and has a relative advantage over more expensive treatments or opioid pain management.

The stable outlook reflects Moody’s forecast that the company’s gross debt/EBITDA will steadily decline but remain above 6.0x over the next 12-18 months.

Moody’s considers Upstream to have adequate liquidity. Moody’s expects Upstream to generate negative free cash flow in 2022, after paying significant growth expenses and reimbursing approximately $13 million in Medicare prepayments and deferred payroll taxes in 2022. Despite these payments, liquidity is supported by the approximately $26 million of cash as of March 31, 2022 and $40 million of availability on the company’s revolving credit facility. In addition, the company has demonstrated its ability to conserve cash if needed by reducing growth investments.

Upstream faces social risks such as growing concerns about access and affordability of health services. However, Moody’s does not consider physiotherapy providers to face the same level of social risk as many other healthcare providers. Additionally, Upstream benefits from positive social considerations, as physiotherapy can be a cheaper and safer alternative to surgery or the use of opioids. From a governance perspective, Moody’s considers Upstream’s growth strategy to be aggressive given its history of debt-financed clinic openings and acquisitions.


The ratings could be improved if Upstream increases its size and scale and demonstrates stable organic growth while effectively executing its expansion strategy. Additionally, debt/EBITDA kept below 6.0x could support an upgrade.

Ratings could be downgraded if the company’s liquidity weakens or if the company fails to manage its rapid growth effectively or if the company pursues more aggressive financial policies.

Upstream Newco, Inc., headquartered in Birmingham, Alabama, is a provider of outpatient rehabilitation services – primarily physical therapy. Through its subsidiaries, Upstream operates approximately 1,150 clinics in 28 states, with a strong presence in the Southeast. Upstream is owned by Revelstoke Capital Partners, LLC, a Denver-based private equity firm. Company revenue for the twelve months ended March 31, 2022 is approximately $663 million.

The main methodology used in these ratings is that of business and consumer services published in November 2021 and available on Otherwise, please see the Scoring Methodologies page on for a copy of this methodology.


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Jaime Johnson
Vice President – Senior Analyst
Corporate Finance Group
Moody’s Investors Service, Inc.
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Ola Hannoun-Costa
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