Regency Health Services Inc.: Two New York...

Regency Health Services Inc.: Two New York financial rating agencies Monday graded Regency Health Services Inc.’s first public issue of debt as a “speculative” investment. Standard & Poor’s Corp. gave a B+ grade to $100 million worth of the Tustin-based nursing home company’s senior subordinated notes, which went to market Monday. Moody’s Investors Service assigned the notes a slightly higher rating of B2.

Richard Matros, Regency’s chief executive, said the company had hoped for a marginally higher B rating from Standard & Poor’s, which did assign a stronger B+ grade to the company’s general corporate debt. Moody’s gave a B3 rating to $50 million worth of convertible subordinated debentures, due in 2005. Standard & Poor’s said its ratings reflect risks associated with Regency’s aggressive expansion, geographically limited marketplace and highly leveraged financial structure. The agency noted that the company’s expansion via acquisitions--such as its merger last year with Tustin-based Care Enterprises Inc., another nursing home operator--requires “significant leveraging” of its capital structure. The company’s profit margins remain “moderate,” reflecting its dependence on skimpy government reimbursements for care of Medicaid patients, the agency said.