S&P downgrades Res-Care

Standard & Poor's said it lowered Res-Care Inc.'s corporate credit rating to B+ from BB-, reflecting a weaker financial risk profile as a result of a proposed leveraged buyout by its sponsor, private-equity firm Onex Corp.

The ratings remain on CreditWatch with negative implications pending the completion of the debt transaction.

"The ratings on Res-Care reflect its weak business risk profile due to the company's high susceptibility to state budget cuts with already-slim profit margins operating in a highly fragmented market," S&P analyst Tahira Wright said in a statement.

The proposed added debt burden will keep lease-adjusted leverage over the next couple of years between 4.0x to 4.5x versus previous historical levels of 3.3x, the agency said.

These are predominant risk factors despite the company's successful track record of acquisitive growth, which has allowed it to expand and diversify its core operations, the agency noted.

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