S&P lowers Res-Care, facility to B+

S&P said it lowered its corporate credit rating on Res-Care Inc. to B+ from BB-.

The outlook is stable.

At the same time, the agency downgraded its issue-level rating on Res-Care's senior secured credit facility to B+ from BB- and revised the recovery rating to 3 from 4. The 3 recovery rating indicates expectations for meaningful (50%-70%, at the low end of the range) recovery in the event of default.

"The downgrade reflects our view that the risks facing the business have escalated, given ongoing occupancy weakness and increasing cost pressures, and that operating performance will be weaker than we expected," S&P credit analyst James Uko said in a news release.

Although it projects Res-Care to deleverage below 4 times and generate $50 million in cash flow this year, the agency said it believes the ongoing industry headwinds and the upcoming impact of the U.S. Department of Labor minimum salary mandate creates significant uncertainty surrounding Res-Care's expected operational performance.

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