S&P lowers Manor Care

Standard & Poor's said it lowered its corporate credit rating on Manor Care Inc. to BBB- from BBB.

At the same time, S&P said it placed all ratings on Manor Care on CreditWatch with negative implications following the announcement that the company has hired a financial advisor to consider strategic alternatives.

The agency said it expects that a transaction to enhance shareholder value may include the issuance of a significant amount of new debt that will compromise credit quality, adding that this follows its concern last year about increased share repurchase activity that resulted in its revision of the rating outlook to negative from stable on May 11, 2006.

Outcomes could include the separation of Manor Care's health care service activities from its real estate, a sale of the company in an LBO, or a sizable dividend, the agency said, noting that it may lower the corporate credit rating further if it believes that Manor Care is willing to adopt an aggressive financial risk profile characteristic of a speculative-grade credit.

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