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S&P rates Res-Care loan BB-, notes B
Standard & Poor's said it assigned its BB- bank loan rating and 1 recovery rating to Res-Care Inc.'s proposed $175 million senior secured revolving credit facility due 2010.
In addition, a B rating was assigned to the company's proposed $150 million of senior unsecured notes due in 2013.
The outlook on Res-Care was revised to positive from stable. The B+ corporate credit rating on the company was affirmed.
Res-Care plans to use the proceeds from the $150 million of notes and about $44 million of on-hand cash to tender its existing $150 million of 10.625% notes, refinance $28 million of existing term debt, and fund related transaction costs.
S&P said the ratings reflect the company's narrow operating focus and the potential for reimbursement rate pressures from government and related payors dealing with overburdened budgets. These pressures are exacerbated by historically rising insurance expenses, which could also squeeze the company's thin EBITDA margins. These credit factors are only partially mitigated by Res-Care's successful expansion of its core operations, its top standing in a unique market (providing support services to individuals with special needs), and its improved financial and liquidity profile.
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