S&P lowers Res-Care view to negative

Standard & Poor’s said it affirmed the BB- corporate credit rating on Res-Care Inc. and revised the outlook to negative from stable.

The rating on Res-Care’s senior secured credit facility is BB- with a 4 recovery rating, indicating 30% to 50% expected default recovery.

The outlook revision follows two quarters of weaker-than-expected operating performance, resulting in slower-than-expected EBITDA growth and higher-than-expected leverage, S&P said.

Margins have trailed previous expectations due to lower-than-expected utilization rates because of reduced referral volumes in Texas, Kentucky and Indiana, the agency said, as well as higher-than-expected labor costs resulting from greater use of overtime to maintain staffing levels.

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