New York, July 31, 2012 -- Moody's Investors Service assigned B2 Corporate Family and Probability of Default Ratings to FC-GEN Operations Investment, LLC, the parent company of Genesis HealthCare LLC (collectively Genesis). Moody's also assigned a B2 (LGD 3, 45%) rating to the company's proposed $325 million senior secured term loan. The outlook for the ratings is stable.

Moody's understands that the proceeds of the loan along with a draw on a new asset based revolving credit facility (not rated by Moody's) will be used to fund the acquisition of the outstanding equity of Sun Healthcare Group, Inc. (Sun) and refinance existing debt. The $275 million acquisition of Sun is expected to close in the fourth quarter of 2012.

The ratings of Sun, including the B1 Corporate Family Rating, remain unchanged and will be withdrawn upon the closing of the transaction and the repayment of Sun's outstanding debt.

Following is a summary of Moody's rating actions. Ratings are subject to Moody's review of final documentation.

Ratings assigned:

FC-GEN Operations Investment, LLC:

Corporate Family Rating, B2

Probability of Default Rating, B2

Genesis HealthCare LLC:

$325 million senior secured term loan due 2018, B2 (LGD 3, 45%)

Ratings unchanged and to be withdrawn at the close of the transaction:

Sun Healthcare Group, Inc.:

Senior secured revolving credit facility expiring 2015, Ba1 (LGD 2, 17%)

Senior secured term loan due 2016, Ba1 (LGD 2, 17%)

Corporate Family Rating, B1

Probability of Default Rating, B1

Speculative Grade Liquidity Rating, SGL-3

RATINGS RATIONALE

Genesis' B2 Corporate Family Rating reflects Moody's expectation that the company will continue to operate with very high lease adjusted leverage given the long term leases for the majority of its facilities. While Moody's expects the cash requirements for these obligations to increase over time, it expects the company to have a relatively modest amount of funded debt outstanding. The rating also reflects Moody's assessment of the risks associated with the reliance on government programs for the majority of revenue and its anticipation that Medicare and Medicaid reimbursement rates will remain under pressure. The rating also reflects Moody's belief that the considerable scale the combined company will have as one of the largest providers of post-acute care services and the increased geographic diversification provided by the acquired facilities will represent a strength over the company's previous position in the sector.

The stable outlook reflects Moody's expectation that the company will continue to generate stable cash flows that can be used to fund planned investment in growth initiatives. The outlook also reflects Moody's expectation that credit metrics will not likely improve in the near term given that the majority of adjusted debt is related to the significant lease obligations of the company. Finally, Moody's expects that the company will remain disciplined with regard to acquisitions and the use of incremental debt following the significant transformational acquisition of Sun.

Moody's expects that metrics will decline from pro forma levels as the company fully absorbs the impact of the October 2011Medicare rate reduction and meaningful improvement beyond that will be limited given the majority of the adjusted debt balance relates to the significant lease obligations. Given that, Moody's does not expect an upgrade of the rating in the near term. However, if the company can grow EBITDA while sustaining debt to EBITDA on a GAAP basis below 5.0 times and decrease the risk related to escalating rent expense requirements, Moody's could upgrade the ratings.

If metrics weaken considerably from integration issues or negative regulatory or reimbursement developments, Moody's could lower the rating. Additionally, if Moody's does not expect Genesis to be able to offset increasing rent expense with sufficient revenue and cash flow growth, or if it increases leverage for a significant debt financed acquisition, Moody's could lower the rating. For example, while Moody's expects metrics to deteriorate initially as the company absorbs a full year of lower Medicare reimbursement levels, if over time Genesis does not reduce debt to EBITDA on a GAAP basis below 7.0 times, Moody's could downgrade the ratings.

For further details refer to Moody's Credit Opinion for FC-GEN Operations Investment, LLC on moodys.com.

The principal methodology used in rating Genesis was the Global Healthcare Service Providers Industry Methodology published in December 2011. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

Genesis provides post-acute care services, including skilled nursing and contract rehabilitation. Pro forma for the proposed acquisition of Sun, the company recognized approximately $4.7 billion in revenue for the twelve months ended March 31, 2012.

REGULATORY DISCLOSURES

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Dean Diaz VP - Senior Credit Officer Corporate Finance Group Moody'sInvestors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653Peter H. Abdill, CFA MD - Corporate Finance Corporate Finance Group JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Releasing Office: Moody's Investors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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