Fitch Places SynergyHealth, Inc. (Wisconsin) on Rating Watch Positive

CHICAGO--(BUSINESS WIRE)--Fitch Ratings has placed the underlying 'BBB-' ratings on SynergyHealth, Inc.'s (Synergy) approximately $70.1 million of bonds issued through the Wisconsin Health and Educational Facilities Authority on Rating Watch Positive following Synergy's signing of an affiliation agreement with Froedtert & Community Health, Inc. (Froedtert, currently rated 'AA-' by Fitch).

The Rating Watch Positive is in response to the July 1, 2008 public announcement that Froedtert and Synergy have signed a formal affiliation agreement and that Froedtert plans to add Synergy to the Froedtert obligated group. To do so, Froedtert has requested approval from Synergy bondholders to allow for the substitution of Synergy's master notes with a new master note from Froedtert and inclusion of Synergy in Froedtert's obligated group. Bondholder approval is expected by the end of July.

No rating action is being taken on Froedtert at this time as Fitch believes any potential dilutive effects of Synergy on Froedtert's credit profile to be minor. In fiscal 2007 (year ending June 30), Synergy had total revenues of $141.6 million, which is approximately 16% of Froedtert's fiscal 2007 (year ending Dec. 31) total revenues of $903.2 million. Although the addition of Synergy's debt will increase the Froedtert obligated group total debt outstanding by 24% (to $360 million from $291 million), Froedtert on its own had funds available to cover the combined maximum annual debt service (MADS) of $22.6 million by 6.7 times (x) in fiscal 2007. It is estimated that the combined entity will continue to maintain liquidity and capital related ratios at or above Fitch's 'AA' category medians.

Fitch expects to meet with Froedtert management during the third quarter of 2008 and will formally review and update Froedtert's long-term rating, at that time.

Located in West Bend, WI SynergyHealth consists of a 119-licensed-bed acute care hospital (St. Joseph's), a 74-physician multispecialty West Bend Clinic, and an outpatient surgery center. Total operating revenue through the nine month interim period ending March 31, 2008 was $105 million.

Froedtert & Community Health is composed of two hospitals: Froedtert Memorial Lutheran Hospital (FMLH; 655 licensed beds) and Community Memorial Hospital (CMH; 237 licensed beds), and several ambulatory and outpatient care locations throughout the Milwaukee metropolitan area.

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