Fitch Rates Adventist Health System Sunbelt (FL) 2008B Revs & 2009E Rfdg Bonds 'AA-'; Outlook Stable

NEW YORK--(BUSINESS WIRE)--Fitch Ratings assigns an 'AA-' long-term rating to the following Adventist Health System Sunbelt bonds:

--$125,000,000 Highlands County Health Facilities Authority hospital revenue bonds, series 2008B;

--$62,520,000 Highlands County Health Facilities Authority hospital revenue refunding bonds, series 2009E.

In addition, Fitch affirms at 'AA-' Adventist's outstanding long-term indebtedness and at 'F1+' its short-term rating on Adventist's variable-rate debt supported by self-liquidity.

The Rating Outlook is Stable.

The series 2008B bonds are being called for mandatory tender and are expected to be converted to fixed rate mode. The proceeds of the series 2009E bonds will be used to refund the Orange County Health Facilities Authority hospital revenue bonds, series 1991-A, the Orange County Health Facilities Authority hospital revenue bonds, series 1991-B and the Orange County Health Facilities Authority hospital revenue bonds, series 1992. The expected sale date of the series 2008B and 2009E bonds is Nov. 5, 2009.

The affirmation of the 'F1+' short-term rating reflects the adequacy of Adventist's liquidity position and management's procedures to access funds in case of an un-remarketed put of any of its outstanding variable rate debt supported by self-liquidity. Fitch's adjusted funds available for an un-remarketed put for Adventist is $2.2 billion, which would cover the costs of the maximum tender exposure of $307.5 million on any given date by 7.2 times (x), significantly exceeding Fitch's criteria for self-liquidity of 1.25x.

The 'AA-' rating and Stable Outlook are based on Adventist's consistently strong financial performance, increasing revenue diversification, presence in several economically vibrant and growing markets and a strong, stable and committed management team. Adventist's strong operating performance has continued through the first six months of 2009 with Adventist posting a 5.4% operating margin ($161 million in operating income) and a 13.3% operating EBITDA, both excellent relative to Fitch's 2008 'AA' category medians.

The main credit weakness is Adventist's relatively higher debt burden, combined with the need for further investment in system facility expansion and to maintain market position. While debt ratios fall below Fitch's medians, several debt metrics continue to show improvement as a result of the solid operating results and prudent management of the system's investment portfolio. Liquidity levels remain, at over 200 days cash on hand, solid for Fitch's 'AA' range, and have been maintained despite Adventist's continued heavy reliance on internally generated cash to fund significant portions of its facility modernization and expansion.

For more detail on Adventist, please refer to Fitch's press release, 'Fitch Rates Adventist Health System Sunbelt (Florida) Ser 2009D Rev Bonds 'AA-'; Outlook Stable', dated Sept. 8, 2009.

The Stable Outlook is based on Fitch's expectation that Adventist can continue to generate stable operating performance as it strengthens its share of markets where it has historically had a strong presence and maintains its historical discipline in expense control and prudent management of its investment portfolio.

Financial disclosure and reporting capabilities by Adventist's management team are among the best in Fitch's portfolio. Other best management practices include asset liability management, managing the investment portfolio as a business unit, implementing a formal capital allocation model, and focusing on quality initiatives.

Headquartered in Winter Park, FL, Adventist is the largest not-for-profit Protestant health care organization in the nation, with 37 hospitals and 17 long-term care facilities in 10 states (Kansas, Colorado, Florida, Georgia, Illinois Kentucky, North Carolina, Tennessee, Texas and Wisconsin). The Adventist Obligated Group includes 34 hospitals and as of Dec. 31, 2008 accounted for 91% of Adventist's assets and 94% of revenues. The Florida Division comprised over 50% of net operating revenue of the system in fiscal 2008 and includes the largest hospital in the U.S., Florida Hospital Orlando. Adventist covenants to provide bondholders with unaudited quarterly statements within 45 days of quarter end and audited annual statements within 150 days of fiscal year end. Adventist's disclosure to EMMA occurs both annually and quarterly, which Fitch views favorably.

Additional information is available at www.fitchratings.com.

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