Fitch Rates Elkhart Gen'l Hospital (Indiana) 2008 Bonds 'A+'; Affs Outstanding at 'A+'

CHICAGO--(BUSINESS WIRE)--Fitch Ratings assigns an 'A+' rating to Elkhart County Hospital Authority, Indiana's planned issuance of approximately $49.2 million in series 2008A variable-rate revenue refunding bonds issued on behalf of Elkhart General Hospital (EGH). Fitch has also affirmed the 'A+' rating on approximately $90.7 million of EGH's outstanding series 1998 and series 2003 bonds, also issued via the Elkhart County Hospital Authority. The Outlook is Stable.

The series 2008 bonds are expected to be priced sometime the week of Dec. 8, 2008. Proceeds from the series 2008 bonds will be used to refund the series 2003 auction-rate bonds and pay associated costs of issuance. The 2008 bonds are expected to be issued as variable-rate bonds and will be backed by a letter of credit provided by JP Morgan Chase, N.A. Fitch will assign the rating on the bonds nearer the sale date based on the JP Morgan Chase, N.A. letter of credit.

The rationale for the 'A+' rating centers on EGH's strong balance sheet indicators and leading market share position in Elkhart County, IN. Credit strengths include EGH's strong liquidity, solid debt service coverage, and a modest debt burden. Through the nine-month interim period ending Sept. 30, 2008, a 3.3% operating margin and 11.6% operating EBITDA margin, on revenues of $207.2 million, continue to buoy EGH's liquidity position despite the current downturn in global capital markets. EGH's balance strength is evidenced by 227.1 days cash on hand, 166.6% cash to debt, and 21.1 times (x) cushion, all better than Fitch's 'A' category medians of 196.8 days, 120.5% and 15.3x, respectively. All of these factors led to continued strong debt service coverage of 4.5x in fiscal 2007 and 5.6x through nine months ended Sept. 30, 2008. Although the north-central Indiana region is highly competitive, EGH maintained a 60% inpatient market share in its primary service area (PSA) of Elkhart County in 2007, which is mostly unchanged since 2003.

The Stable Outlook reflects Fitch's expectation that EGH will continue to operate as the leading provider of inpatient services in its core market, leading to sustained operating performance in-line with the category medians. Despite little to no expected growth in the market, EGH's volumes are expected to remain consistent, especially given the recent stabilization of the physician market. EGH has added depth in its neurosurgeon ranks and has stabilized its orthopedic complement, which did suffer from some defections to competitors in 2006. Fitch believes that EGH will successfully continue to implement its physician alignment plan and continue its execution of matching operating expenses with operating activity.

Credit concerns surround EGH's very competitive landscape in north-central Indiana and the high concentration of one major industry, the region's dependence upon the residential vehicle manufacturing industry, which has declined rapidly because of the macro-economic condition of the U.S. economy.

Elkhart General Hospital, Inc. is a 325-licensed (297-available) bed community hospital providing primary and secondary care services, producing total revenues of $263.2 million at fiscal year-end 2007 (Dec. 31). The hospital is located in the city of Elkhart, approximately 15 miles east of South Bend, IN. Disclosure to Fitch has been good and includes a balance sheet, income statement, and cash flow statement and utilization statistics. EGH covenants to provide annual and quarterly financial information to a nationally recognized municipal securities information repository (NRMSIR) and the Indiana state information depository.

Contact: Anthony A. Houston +1-312-368-3180 or Jim LeBuhn +1-312-368-2059, Chicago.

Media Relations: Cindy Stoller, New York, Tel: +1 212 908 0526, Email: cindy.stoller@fitchratings.com.

Fitch Ratings assigns an 'A+' rating to Elkhart County Hospital Authority, Indiana's planned issuance of approximately $49.2 million in series 2008A variable-rate revenue refunding bonds issued on behalf of Elkhart General Hospital (EGH). Fitch has also affirmed the 'A+' rating on approximately $90.7 million of EGH's outstanding series 1998 and series 2003 bonds, also issued via the Elkhart County Hospital Authority. The Outlook is Stable.

The series 2008 bonds are expected to be priced sometime the week of Dec. 8, 2008. Proceeds from the series 2008 bonds will be used to refund the series 2003 auction-rate bonds and pay associated costs of issuance. The 2008 bonds are expected to be issued as variable-rate bonds and will be backed by a letter of credit provided by JP Morgan Chase, N.A. Fitch will assign the rating on the bonds nearer the sale date based on the JP Morgan Chase, N.A. letter of credit.

The rationale for the 'A+' rating centers on EGH's strong balance sheet indicators and leading market share position in Elkhart County, IN. Credit strengths include EGH's strong liquidity, solid debt service coverage, and a modest debt burden. Through the nine-month interim period ending Sept. 30, 2008, a 3.3% operating margin and 11.6% operating EBIDTA margin, on revenues of $207.2 million, continue to buoy EGH's liquidity position despite the current downturn in global capital markets. EGH's balance strength is evidenced by 227.1 days cash on hand, 166.6% cash to debt, and 21.1 times (x) cushion, all better than Fitch's 'A' category medians of 196.8 days, 120.5% and 15.3x, respectively. All of these factors led to continued strong debt service coverage of 4.5x in fiscal 2007 and 5.6x through nine months ended Sept. 30, 2008. Although the north-central Indiana region is highly competitive, EGH maintained a 60% inpatient market share in its primary service area (PSA) of Elkhart County in 2007, which is mostly unchanged since 2003.

The Stable Outlook reflects Fitch's expectation that EGH will continue to operate as the leading provider of inpatient services in its core market, leading to sustained operating performance in-line with the category medians. Despite little to no expected growth in the market, EGH's volumes are expected to remain consistent, especially given the recent stabilization of the physician market. EGH has added depth in its neurosurgeon ranks and has stabilized its orthopedic complement, which did suffer from some defections to competitors in 2006. Fitch believes that EGH will successfully continue to implement its physician alignment plan and continue its execution of matching operating expenses with operating activity.

Credit concerns surround EGH's very competitive landscape in north-central Indiana and the high concentration of one major industry, the region's dependence upon the residential vehicle manufacturing industry, which has declined rapidly because of the macro-economic condition of the U.S. economy.

Elkhart General Hospital, Inc. is a 325-licensed (297-available) bed community hospital providing primary and secondary care services, producing total revenues of $263.2 million at fiscal year-end 2007 (Dec. 31). The hospital is located in the city of Elkhart, approximately 15 miles east of South Bend, IN. Disclosure to Fitch has been good and includes a balance sheet, income statement, and cash flow statement and utilization statistics. EGH covenants to provide annual and quarterly financial information to a nationally recognized municipal securities information repository (NRMSIR) and the Indiana state information depository.

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