Fitch Rts $78.5MM Hosp Auth of St. Joseph Cnty (Indiana), Hlth Sys Revs, 2008A & B 'AA+/F1'

NEW YORK--(BUSINESS WIRE)--Fitch Ratings assigns a rating of 'AA+/F1' to the $78,495,000 Hospital Authority of St. Joseph County (IN), health system revenue refunding bonds (Memorial Health System), consisting of $38,580,000 series 2008A bonds and $39,915,000 series 2008B bonds (the 'Bonds'). The long-term rating assigned to the Bonds is based jointly on the underlying rating assigned to the Memorial Health System, Inc. (currently rated 'AA-' by Fitch), and the support provided by the irrevocable direct-pay letter of credit ('LOC') provided by Fifth Third Bank (currently rated 'A+/F1'). The short-term 'F1' rating assigned to the bonds is based solely on the Fifth Third Bank (Fifth Third) LOC. (For more information on the underlying credit please refer to the press release published on July 16, 2008).

The long-term rating assigned to the Bonds is based on Fitch's methodology which considers the joint probability of the failure of both a rated obligor and a bank LOC provider. The methodology results in a rating that is up to two notches higher than the stronger of the two credits if the following conditions are met: (1) both entities have a rating of 'A' or higher; (2) the transaction is structured such that payments from both the municipal issuer and the bank are in the flow of funds and both entities would have to fail to perform before the bonds defaulted; and (3) the credit of the bank and the rated obligor have no more than a medium degree of correlation. Fitch has determined a low degree of correlation between the Memorial Health System, Inc. ('Memorial Health') and Fifth Third. If either Memorial Health or Fifth Third were downgraded to 'A-' or lower, the joint probability could no longer be applied and the long-term rating for the individual series of bonds would then reflect the higher of the two ratings.

The bank is obligated to make payments of principal and interest when due, as well as purchase price for tendered bonds. The rating on the bonds will expire on the earliest of: Aug. 28, 2011, the stated expiration date of the LOC, unless otherwise extended, any prior termination of the LOC, or defeasance of the Bonds. The LOC provides full coverage of principal plus an amount equal to 48 days of interest at a maximum rate of 12% based on a year of 365 days. The remarketing agent for the Bonds is Citigroup Global Markets, Inc. The Bonds are expected to be delivered on or about Aug. 28, 2008.

The Bonds initially bear interest at the weekly rate, but may be subsequently converted to a daily, weekly, bond interest or long-term interest rate mode. While in the weekly rate mode, interest payments are made on the first Wednesday of each month, commencing Sept. 3, 2008. Bondholders have the option to tender their Bonds in the daily and weekly rate modes with prior notice of the purchase to the tender agent, remarketing agent and trustee. The Bonds are subject to mandatory tender: (1) during the short-term rate, on the first day following the last day of each bond interest term; (2) on the first day of each interest rate period date; (3)(a) on the fifth business day preceding any expiration or termination of the LOC without replacement with an Alternate LOC or (b) on the proposed substitution date of the LOC; (4) During Daily or Weekly Rate Periods; on any business day designated by the Memorial Health; and (5) on the fourth business day following the Trustee's receipt of written notice of the occurrence of an event of default under the reimbursement agreement and the direction of the LOC provider to the Trustee to call a mandatory tender of the Bonds. Optional and mandatory redemption provisions also apply to the bonds.

Proceeds of the series 2008 A & B bonds will be used to refund the Hospital Authority of St. Joseph County's health system revenue refunding bonds, series 2006 (Memorial Health System) and health system revenue bonds, series 2003 (Memorial Health System) respectively.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.