Omega Announces Senior Unsecured Debt and Preferred Stock Rating Upgrades by Standard & Poor's

Business Wire, Jan 31, 2006

> TIMONIUM, Md. -- Omega Healthcare Investors, Inc. (NYSE:OHI) today announced rating upgrades by Standard & Poor's to the Company's senior unsecured debt and preferred stock on Friday, January 27, 2006. The Company's senior unsecured debt was upgraded to 'BB' and the Company's preferred stock rating was upgraded to 'B .' The Company's outlook is 'Stable.' Below is the full text of Standard & Poor's release announcing the Company's upgrades.

Headline: S&P Raises Omega Healthcare Investors Credit Rating To
    'BB'

    RD Headline: Omega Healthcare Investors Inc. Upgraded To 'BB';
    Company Growth and Solid Financial Profile Cited

    On Jan. 27, 2006, Standard & Poor's Ratings Services raised its
    corporate credit rating on Omega Healthcare Investors Inc. (Omega)
    to 'BB' from 'BB-'. In addition, ratings are raised on the
    company's senior unsecured debt and preferred stock, impacting
    $603.5 million in securities. The outlook is stable (see list).

    The upgrade acknowledges the company's ability to make accretive
    acquisitions and access the capital markets to facilitate this
    growth while preserving its financial profile. The company's
    stable portfolio, aided by improved operator rent coverage, is
    additional critical consideration. However, overall liquidity
    remains relatively constrained but adequate. Additionally,
    although the government reimbursement environment is currently
    stable, these programs can be volatile and have historically had a
    negative impact on operators.

    Maryland-based Omega invests in and provides financing to the
    long-term care industry. The company primarily owns (91% of
    investments) or, to a lesser extent, holds mortgages (9%) on 215
    skilled nursing facilities (SNFs), eight assisted living
    facilities, and two rehabilitation facilities. These facilities,
    operated by 35 independent health care operating companies, have
    24,476 beds in 27 states.

    In April 2004, after several years of playing defense and
    restructuring its portfolio and balance sheet, Omega made its
    first new investment in about five years. After initiating just
    over $100 million of investment activity in 2004 (10.3% average
    initial yield), management closed more than $300 million in new
    investments in 2005. These investments had an average initial
    yield of 10.4%, including a $61.75 million mortgage with a 10%
    yield with an option to purchase the facilities. Omega has
    prudently funded these investments with a combination of equity,
    debt and, to a lesser extent, proceeds from asset sales and
    mortgage repayments, helping the company maintain a stable
    financial profile that supports the higher rating.

    Due to current management's portfolio restructuring efforts, a
    more stable reimbursement environment, and new investments, the
    company's portfolio is currently stable. Steady operator rent
    coverage improvement indicates healthier property level
    performance, as well as lease restructurings. However, tenant
    concentration is high. The company's top 10 operators are unrated
    entities and represent roughly 80% of Omega's 2006 contractual
    revenues, with Sun Healthcare and CommuniCare representing the top
    two at 17% and 15% of revenues, respectively. Nonetheless,
    operator EBITDAR-to-rent coverage was a healthy 1.47x for the
    trailing 12 months ended Sept. 30, 2005. In addition to the stable
    operator base, management does not face any material
    lease/mortgage maturities until 2010, which provides for a fairly
    predictable income stream.

    Although Omega has financed a majority of its growth with debt,
    management has issued common equity ($128 million net in 2004 and
    2005) to fund a portion of this growth to maintain leverage at a
    moderate level. As of year-end 2005, debt/book capital basis was
    56% and 68% on a debt plus preferred/book capital basis. Leverage
    metrics on an undepreciated real estate basis are: 50% debt and
    60% debt plus preferred. Coverage measures have exhibited positive
    trends, benefiting from lower cost of capital that has supported
    accretive acquisitions. Debt service and fixed charge coverage
    were 3.3x and 2.4x, respectively. Coverage measures are supported
    by stable cash flow derived from the company's predictable rental
    stream, with modest lease/mortgage rollover, no meaningful debt
    maturities until 2014, and a largely fixed-rate debt structure. A
    portion of the proceeds from the recent sale of $175 million 7%
    senior notes due 2016 was used to repay the $100 million of 6.95%
    senior notes that was scheduled to mature in 2007, thus
    eliminating any near-term refinance risk.

    Liquidity.

    Omega's liquidity position is adequate to meet its capital needs.
    Liquidity is largely derived from its $200 million secured line of
    credit that matures in August 2007 (has a one-year extension
    option), which had roughly $140 million of availability at the end
    of 2005. The credit facility is secured by 44 facilities ($206
    million undepreciated real estate cost basis) encumbering about
    25% of real estate income. Omega also has a modest $4 million cash
    balance. Access to the capital markets has been good to-date, with
    Omega successfully tapping both the debt and equity markets
    several times in 2004 and 2005. Management is somewhat reliant on
    the external capital markets and expects to issue debt and equity
    to fund future acquisitions with the intention of maintaining its
    moderate leverage profile. Total coverage of all fixed charges,
    including common dividends, is comfortably above 1x and projected
    to measure 1.15x in 2006, producing additional liquidity in the
    form of free cash flow in the $10 million to $15 million range.

    Outlook

    Stable. A stable operator base, comfortable rent coverage at the
    property level, and modest lease and mortgage expirations should
    produce stable cash flow to support debt protection measures.
    Further positive ratings momentum would be derived from a steady
    improvement in the company's financial profile, especially fixed
    charge coverage, and continued stability at the property level.
    Ratings would be negatively affected by unexpected shifts in the
    currently stable reimbursement environment, or if the company's
    growth initiatives are pursued in a highly leveraged manner.

    Ratings List
    Ratings Raised
    Omega Healthcare Investors Inc.

                                      To              From
        Corporate credit rating    BB/Stable/--    BB-/Stable/--
        Unsecured debt                BB                BB-
        Preferred stock               B                 B