S&P: Res-Care outlook positive

Standard & Poor's said it revised its outlook on Res-Care Inc. to positive from stable and affirmed its ratings on the company, including the B corporate credit rating, B+ senior secured debt rating and B- senior unsecured debt rating.

S&P said the outlook revision reflects S&P's expectations that Res-Care will improve its credit profile through equity financed acquisitions over the next two years. At the end of the second quarter of 2004, financial sponsor Onex Partners LP will complete its purchase of $50.5 million of Res-Care's series A convertible preferred stock. Onex will own about 30% of the company after this transaction and the purchase of 3.7 million shares from current shareholders.

S&P said it expects that Res-Care will use the proceeds to acquire a number of relatively small special needs services providers over the next two years.

S&P said that, still, the low speculative-grade ratings on Res-Care Inc. reflect the rate pressures that the company faces due to overburdened government budgets. Res-Care also faces rising insurance expenses and relatively high debt levels. These factors are somewhat offset by the company's successful expansion and improved efficiency of its core operations, as well as its top standing in its unique market (providing support services to individuals with special needs).

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