Fitch Rates Ascension Health Senior Credit Group Series 2010A-E Bonds 'AA+' & 2010F Bonds 'AA+/F1+'

CHICAGO--(BUSINESS WIRE)--Fitch Ratings has assigned 'AA+' ratings to the following Ascension Health Senior Credit Group fixed rate revenue bonds:

--$85.4 million Connecticut Health and Educational Facilities Authority series 2010A;

--$205.7 million Michigan State Hospital Finance Authority series 2010B;

--$140.9 million Health and Educational Facilities Board of Rutherford County (TN) series 2010C;

--$69.5 million Tarrant County Health, Cultural and Educational Facilities Authority (TX) series 2010D;

--$169.1 million Wisconsin Health and Educational Facilities Authority series 2010E.

In addition, Fitch Ratings has assigned 'AA+/F1+' ratings to $675.4 million Ascension Health Senior Credit Group series 2010F through I variable rate revenue bonds which are expected to be issued through one or more of the following issuing authorities:

--Michigan State Hospital Finance Authority;

--Connecticut Health and Educational Facilities Authority;

--Health and Educational Facilities Board of Rutherford County (TN);

--Wisconsin Health and Educational Facilities Authority.

Furthermore, Fitch affirms the 'AA+' rating on approximately $3.6 billion of Ascension Health Senior Credit Group bonds currently outstanding, the 'AA' rating on approximately $594 million of Ascension Health Subordinate Credit Group bonds currently outstanding and the 'F1+' short-term rating on approximately $2.2 billion of variable rate and short-term debt currently outstanding based on the adequacy of Ascension's self-liquidity.

The Rating Outlook is Stable.

The fixed rate bonds are expected to price the week of March 8th while the variable rate bonds are expected to be sold the week of March 22nd. Bond proceeds will be used to fund or reimburse the Senior Credit Group for various capital expenditures throughout the system as well as refund approximately $747 million of outstanding debt and pay associated costs of issuance. As part of the 2010 plan of finance, Ascension expects to redeem or defease approximately $538 million of outstanding indebtedness with cash generated from operations.

RATING RATIONALE:

--Ascension's broad scope of operations, preponderance of high performing providers with strong market positions, consistent operating results, well developed management practices and low debt burden combine to support Fitch's highest long-term rating for acute care systems.

--Due to the wide geographic dispersion of its operations, Ascension's financial results are relatively insulated from local and regional economic, political and demographic changes that could negatively impact pricing, inflation and/or patient volumes.

--Ascension's light debt burden and solid operating profitability combine to produce strong coverage of senior obligation maximum annual debt service (MADS) by operating EBITDA of 5.7 times (x) and 5.6x in fiscal 2008 and 2009, respectively.

--Ascension's strong management practices are evident in improved revenue collection, consolidation of redundant services into a centralized business office and a willingness to close or divest money losing operations. Ascension's systematic approach to identifying, standardizing and implementing best practices in all aspects of its operations has generated stable operating margins and cash flow.

--Ascension's unrestricted cash and investments of $6.4 billion at Dec. 31, 2009 equates to 189 days cash on hand (DCOH), 155% of long-term debt and a cushion ratio (based on pro forma Senior Obligation MADS) of 29.3x.

SECURITY:

Security interest in pledged revenues of the Senior Credit Group.

CREDIT SUMMARY:

The 'AA+' rating assigned to Ascension Senior Credit Group and 'AA' rating assigned to the Subordinate Credit Group reflect the benefit of Ascension's large geographic footprint, the system's light debt burden which allows for robust coverage of MADS, strong and proactive management practices and controls and ample liquidity. Ascension is unique among Fitch's not-for-profit healthcare systems because of the wide geographic diversity of its operations. With 67 hospitals in 19 states and the District of Columbia, Ascension operates facilities that stretch from New York to Washington and Michigan to Florida and Texas. This geographic diversity provides a certain level of insulation from risks associated with economic, demographic and environmental changes which could negatively impact hospitals and healthcare systems operating in an individual state or multi-state regions. Furthermore, Ascension's hospital portfolio is heavily weighted with local market leaders.

Ascension's debt burden is light with senior obligation MADS being just 1.5% of fiscal 2009 revenues as compared to 2.8% for Fitch's 2009 'AA' median. Combined with solid operating profitability, historical coverage of pro forma senior obligation MADS by EBITDA was a robust 8.2x in 2007 and 7.2x in 2008. Due to investment losses during fiscal 2009, senior obligation MADS coverage by EBITDA dropped to 2.2x in 2009 and before jumping to 8.3x in the six month interim period ended Dec. 31, 2009. In fiscal 2009, Ascension generated $1.23 billion of operating EBITDA on total revenues of $14.3 billion or an 8.6% operating EBITDA margin as compared to 9.8% for the 'AA' median. Operating profitability was depressed in 2009 due primarily to patients' delaying elective surgeries and the difficult operating environment in southeastern Michigan. However, Ascension's light debt burden resulted in MADS coverage by operating EBITDA of 5.6x in fiscal year (FY) 2009 and 6.2x for the first six months of fiscal 2010, which exceeds Fitch's 2009 'AA' median of 3.8x.

Ascension's credit profile has been enhanced due to its excellent management practices which are evidenced by improved revenue collection, further consolidation of redundant services into a centralized business office and a willingness to close or divest money losing operations. Ongoing improvements in the areas of quality and safety, bad debt management, supply chain, payer contracting, and risk management have yielded favorable results and demonstrate the system's ability to pilot programs in local ministries and then leverage expertise across its spectrum of providers.

As with many healthcare providers, Ascension's liquidity position has rebounded nicely over the last 12 months. At Dec. 31, 2009, total unrestricted cash and investments totaled approximately $6.4 billion as compared to $4.9 billion at Dec. 31, 2008. As a result, Ascension's DCOH jumped to 189 from 153 while unrestricted cash and investments as a percentage of total debt improved to 155% from 118%. Ascension's cushion ratio (based on Senior Obligation MADS) at Dec. 31, 2009 was a robust 29.3x.

The 'F1+' rating is based on the sufficiency of Ascension's liquid resources and written procedures to fund any un-remarketed weekly or annual puts on its debt. Upon successful execution of the series 2010 plan of finance, Ascension's capital structure will consist of $497 million of weekly variable rate demand bonds, $247 million of annual put bonds, $694 million of multi-annual put bonds with maturities between one and three years and $318 million of Windows weekly reset bonds. Ascension's maximum put exposure in any given week totals approximately $1.1 billion. Based on Fitch's Rating Criteria related to Self Liquidity, Ascension had eligible cash and investments, commercial paper and reverse repurchase agreements in excess of 125% of its maximum put exposure in any given week. Ascension provides Fitch monthly cash and investment reports.

Headquartered in St. Louis, MO Ascension Health is the largest Catholic sponsored health care provider in the United States. The system operates 67 acute care hospitals located in 19 states and the District of Columbia. On a fully consolidated basis, Ascension Health reported total revenues of $14.3 billion and total assets of $16.5 billion in fiscal 2009. Ascension has covenanted to provide audited financial information and annual operating data within 180 days of each fiscal year end and quarterly unaudited financial information for the first three quarters within 60 days of each fiscal quarter end. The annual and quarterly financial releases and all notices of material events will be filed by the bond trustee with Municipal Securities Rulemaking Board through its Electronic Municipal Market Access system (or 'EMMA System'). Additionally, Ascension has made annual and quarterly financial information available on its website at 'www.ascensionhealth.org'. Fitch views Ascension's disclosure content and practices positively.

Applicable criteria available on Fitch's website at 'www.fitchratings.com' include:

--'Nonprofit Hospitals and Health Systems Rating Criteria' (Dec. 29, 2009);

--'Revenue-Supported Rating Criteria' (Dec. 29, 2009);

--'Criteria for Assigning Short Term Ratings Based on Internal Liquidity' (Dec. 30, 2009).

Additional information is available at 'www.fitchratings.com'.

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