S&P cuts Extendicare outlook to negative

Standard & Poor's said it revised its outlook on Extendicare Health Services Inc. to negative from stable and affirmed the company's BB- corporate credit rating, BB secured bank loan rating with a recovery rating of 1, B+ senior unsecured debt rating and B subordinated debt rating.

The outlook revision follows the announcement that the company is considering various options to enhance shareholder value. In the agency's view, should a sale or reorganization of the parent Extendicare Inc. occur, it will likely weaken the credit profile of both the parent and Extendicare.

The speculative-grade ratings on Extendicare reflect the volatile reimbursement environment that is characteristic of the nursing home industry, S&P said.

This factor is tempered by the geographical dispersion of Extendicare's facilities: the company has more than 360 nursing homes and assisted living centers located in 19 states. In addition, the agency said the January 2005 acquisition of Assisted Living Concepts added a new dimension to the company, it has been performing reasonably well, and the acquisition lowered Extendicare's overall exposure to government reimbursement.

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