Cornell Cos. Inc. Upgraded, Ratings Taken Off Watch
NEW YORK (Standard & Poor's) July 19, 2007--Standard & Poor's Ratings Services said today it raised its corporate credit rating on Houston, Texas-based Cornell Companies Inc. to 'B' from 'B-'. At the same time, Standard & Poor's raised its rating on the company's senior unsecured notes to 'B-' from 'CCC+'. The ratings were removed from CreditWatch, where they were placed with positive implications on May 9, 2007, reflecting Cornell's sustained improvement in operating performance and stronger financial risk profile. "The upgrade reflects Cornell's improved operating performance, more favorable industry fundamentals, and strengthened credit protection measures," said Standard & Poor's credit analyst Mark Salierno. The outlook is stable. The ratings on Cornell reflect its narrow business focus, limited size, customer concentration, and leveraged financial profile. These risks are somewhat offset by favorable demographic trends within the niche private domestic corrections services industry. Cornell is a narrowly focused company providing corrections, treatment, and educational services to U.S. federal, state, and local government agencies. The company's services include adult secure (which represented close to half of the company's total fiscal 2006 sales and about 64% of operating income), juvenile (32% of 2006 sales and 18% of operating income), and community corrections (18% of 2006 sales and just under 18% of operating income). With a service capacity of more than 18,000 beds in the U.S., Cornell is the third-largest participant in the U.S. niche privatized corrections industry.
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