Fitch Affirms Jennie Stuart Medical Center (Kentucky) at 'BBB+'; Outlook Stable.

CHICAGO -- Fitch Ratings affirms the underlying 'BBB+' rating on the County of Christian, Kentucky's outstanding $60.1 million series 2006 fixed-rate revenue bonds (the 2006 bonds) issued on behalf of Jennie Stuart Medical Center (JSMC). The Rating Outlook is Stable. The bonds are insured by Assured Guaranty, whose Insurer Financial Strength is rated 'AA', Rating Watch Negative by Fitch.

The 'BBB+' rating is supported by JSMC's leading market position and improved operating performance, which primary credit strengths offset an elevated debt load and liquidity metrics that are somewhat light against the debt load for the rating level.

JSMC has a dominant 80% inpatient market share position in its primary service area, virtually unchanged from 80.9% in 2007. JSMC has provided essential services within their market for nearly 100 years and is the only facility within an hour's drive that provides emergency and acute care inpatient services. The nearest competitor, Gateway Medical Center, is located in Tennessee approximately 30 miles to the south. Fitch believes the local economy is diverse and stable; buoyed by the presence of Fort Campbell, which brings both military and civilian jobs to the area.

JSMC's market share has contributed to historically solid operating performance, with JSMC generating average EBITDA and operating EBITDA margins of 10.5% and 11.6% respectively from 2005-2008; and a strong 13.5% and 13.2% respectively in the nine-month interim period ended Aug 31, 2009. Overall margins dipped in 2008, driven by higher than anticipated interest costs associated with the dislocation of the auction rate securities market and the poor reimbursement in JSMC's joint venture ASC. Improved performance in the interim is due in part to the ASC being brought under the JSMC provider number, resulting in improved reimbursement.

Credit concerns include an elevated debt load and liquidity metrics that are somewhat light against that debt level for the rating category. JSMC's historical pro forma coverage of maximum annual debt service (MADS) is weak relative to Fitch's 'BBB' category median. MADS coverage by EBITDA was 2.5 times (x), equal to that of the 'BBB' median. With MADS as a percentage of total revenue at 5.3%, JSMC is above the 'BBB' median of 3.5%. Even with a solid 126.2 days cash on hand in 2009, liquidity coverage metrics are light, with cash-to-debt at 41.2% and an cushion ratio of 5.3x, both below Fitch 'BBB' medians of 61.5% and 8.1x. While the debt leverage is somewhat high, capital expenditures as a percent of depreciation have dropped to 37.6% in 2009 from 67.4% in 2008, indicating lighter capital spending. Fitch also notes that JSMC has reported no plans to issue additional debt in the short to medium term, and Fitch's expectation is that they will maintain an operating profile consistent with historical trends and those of category medians over the medium to long term.

JSMC is a 194 licensed bed, inpatient acute care hospital located in Hopkinsville, Kentucky, approximately 70 miles north of Nashville, Tennessee. At fiscal year-end Nov. 30, 2008, JSMC reported total revenues of $98.03 million. JSMC covenants to provide bondholders with audited annual information within 150 days of fiscal year-end. Disclosure to date as provided to Fitch by JSMC has been satisfactory.

Additional information is available at www.fitchratings.com.

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