Correction -- Fitch Affirms Deborah Heart & Lung Center's (New Jersey) at 'BBB'; Outlook Stable.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- (This is a corrected version of a release issued August 11, 2006. The rating for one of the swap counterparties has been updated in the sixth paragraph.) Fitch affirms the 'BBB' rating on the outstanding $26 million New Jersey Health Care Facilities Authority's revenue bonds, Deborah Heart and Lung Center  This article or section is written like an .Please help [ rewrite this article] from a neutral point of view. Mark blatant advertising for , using . (DHLC), series 1993. The Rating Outlook is Stable. The 'BBB' rating is mainly supported by DHLC's strong support agreement with the Deborah Hospital Foundation (DHF DHF dihydrofolate or dihydrofolic acid. ) and DHF's current unrestricted liquidity of approximately $33 million. Fitch believes DHF's assets are sufficient to provide adequate credit strength. Should DHF's assets experience a significant decline, downward rating pressure could occur. DHF has a subsidy agreement with DHLC where DHF is obligated ob·li·gate tr.v. ob·li·gat·ed, ob·li·gat·ing, ob·li·gates 1. To bind, compel, or constrain by a social, legal, or moral tie. See Synonyms at force. 2. To cause to be grateful or indebted; oblige. to fund DHLC's cash flow requirements. In fiscal 2005, DHF transferred $10 million ($6.2M towards operations support) and management is again expecting a transfer of approximately $10 million for fiscal-year (FY) 2006. Fitch feels this level of subsidy is appropriate given DHLC's mission and is comparable to the amounts transferred in past years. Furthermore, Fitch views management's renewed focus on improved control over the entire organization favorably, as DHF and DHLC are now being led by one management team. Fitch's stable outlook is based on the expectation that DHF's unrestricted liquidity will remain at or above $30 million. Additional credit strengths are DHLC's solid reputation, broad service area and referral base. DHLC continues to benefit from a strong reputation as a provider of cardiac, pulmonary, and vascular services in New Jersey and has a broad service area and referral base including Burlington, Mercer, Middlesex, Monmouth, and Ocean counties. Credit concerns include the declining liquidity positions of DHF and DHLC, increasing competition, and future capital expenditures. At June 30, 2006, DHF had approximately $32.7 million in unrestricted cash and investments, down from $37.1 million for the previous year. Management expects that increased fundraising and endowment support for fiscal 2006 will allow DHF to maintain current liquidity levels at fiscal year end following the transfer to DHLC. Cash for DHLC declined as unrestricted cash and investments dropped to $11 million at June 30, 2006, from $18 million in FY2005. However, DHLC's current liquidity levels resemble FY2000 and FY2001 (During such time Fitch maintained the 'BBB' rating). During fiscal-years 2002, 2003 and 2004, DHLC experienced peaks in its revenues that allowed DHLC to not rely on DHF for support. Now that this revenue stream has stabilized, and both DHF and DHLC are managed by the same team, Fitch expects future operating practices to revert back to historical practices. While DHLC maintains a strong reputation for care, there has been a significant amount of increased competition for the specialty services DHLC provides, and management will need to continue to address this growing pressure. As of FY2005, DHLC had a high average age of plant at 11.6 years and at June 30, 2006 the average age jumped to 12.7 years. Recent capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. has been depressed and given the highly specialized equipment and infrastructure that DHLC's services demand; future capital expenditures could negatively affect cash flow and liquidity. Management is projecting an approximate $13 million operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. (before DHF support) in 2006. Additionally, management is also expecting no more than a $1 million reduction in revenue due to the upcoming DRG DRG, n the abbreviation for diagnosis-related group. DRG see dorsal respiratory group. DRG Diagnosis-related group Managed care A unit of classifying Pts by diagnosis, average length of hospital stay, and (diagnosis related group) recalibration announced by the Center for Medicare and Medicaid Medicare and Medicaid U.S. government programs in effect since 1966. Medicare covers most people 65 or older and those with long-term disabilities. Part A, a hospital insurance plan, also pays for home health visits and hospice care. Services. In FY2004, DHLC entered into three total return swaps Total Return Swap Any swap in which the non-floating rate side is based on the total return of an equity or fixed income instrument with a life longer than the swap. Notes: Total return swaps are most common in equity or physical commodity markets. (one swap has since expired effective July 31, 2005) and a floating- to fixed-rate swap that synthetically refunded its series 1993 bonds as well as a fixed- to floating-rate swap. The counterparty on the outstanding two total return swaps is Morgan Stanley  To comply with Wikipedia's , the introduction of this article needs a complete rewrite. Capital Services Inc. Fitch does not rate Morgan Stanley Capital Services Inc., but does rate the parent company Morgan Stanley at 'AA-/F1+'. The counterparty on the floating- to fixed-rate swap is Wachovia Bank, National Association, which Fitch rates 'AA-/F1+'. In addition, in FY2002, the hospital entered into a fixed- to floating-rate swap in the notional amount The notional amount (or notional principal amount or notional value) on a financial instrument is the nominal or face amount that is used to calculate payments made on that instrument. This amount generally does not change hands and is thus referred to as notional. of $27.2 million with Lehman Brothers Holdings Inc., which Fitch rates 'A+/F1+'. As of August 7, 2006, the mark to market on DHLC's swaps was a favorable $797 thousand. Deborah Heart and Lung Center is a 161-bed tertiary care tertiary care Managed care The most specialized health care, administered to Pts with complex diseases who may require high-risk pharmacologic regimens, surgical procedures, or high-cost high-tech resources; TC is provided in 'tertiary care centers', often cardiac, pulmonary, and vascular care facility, which is located in Browns Mills, NJ (approximately 20 miles from Trenton). DHLC has total revenues of approximately $150.7 million in FY2005. DHLC covenants to disclose only annual audited financial information to the Nationally Recognized Municipal Securities Information Repositories (NRMSIRS) and not quarterly financial information, which Fitch views negatively. However, Fitch does note that DHLC's bond covenants date back to documents produced in 1993 when the expectations for disclosure were not as thorough. Currently, DHLC does provide quarterly and annual audited information to the trustee and The New Jersey Health Care Facilities Authority as well as to bondholders upon request. Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. 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 Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from the 'Code of Conduct' section of this site. |
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