Fitch Affirms Poudre Valley Health Care -- Colorado -- $148MM Bonds At 'A-'; Outlook To Negative.

Business Editors

NEW YORK--(BUSINESS WIRE)--Oct. 15, 2003

Fitch Ratings has affirmed the 'A-' rating on the approximately $148 million outstanding Colorado Health Facilities Authority, (Poudre Valley Health Care, Inc.) series 1998A and B bonds. The Rating Outlook has been revised to Negative. On Oct. 1, 2003, Fitch assigned a rating of 'F1' to $40,000,000 Colorado Health Care Facilities Authority's hospital revenue commercial paper notes (Poudre Valley Health Care, Inc. Project) Series A. The short- term 'F1' rating on the notes is based on the support provided by an irrevocable, direct-pay letter of credit (LOC) issued by JPMorgan Chase Bank. Proceeds of the CP-Notes will be used to refinance a $40 million bullet payment associated with the series 1998B bonds. Management anticipates that approximately $20 million will be drawn by the end of November. Fitch believes the issuance of the CP-Notes will have a neutral affect on Poudre's overall financial profile.

The 'A-' affirmation is based on Poudre Valley Health Care, Inc.'s (Poudre) dominant market share, solid financial profile, and favorable utilization trends. Poudre boasts a 90% market share in Fort Collins, CO and, combined with the recent population growth in the service area, has experienced steady increases in both inpatient and outpatient admissions. Poudre's financial profile is strong and compares favorably with Fitch's 'A' medians. Although liquidity has temporarily been affected due to the reserving of $20 million for the upcoming debt service payment, Poudre still reported 212 days cash on hand and cash to debt of 110% at Aug. 31, 2003.

Operations through the eight month interim period were strong, with operating, excess, and EBIDA margins of 7.2%, 9%, and 19.8%, respectively. Solid bottom line performance has also led to maximum annual debt service coverage of 3.3 times (x) through Aug. 31, 2003. Fitch also views Poudre's joint ventures for ambulatory surgery, diagnostic imaging, and cardiac catheterization favorably as physician loyalty to Poudre remains high and total outpatient cases continue to rise and contribute to the bottom line.

Fitch's primary reason for the Negative Outlook is an anticipated sizable debt issuance for the construction of a new specialty hospital, which is expected to take place in the second quarter of 2004. Poudre and Regional West Health Services, located in Scottsbluff, Nebraska have organized a separate company to fund, construct, and manage the new facility. Poudre will have an 88% share of the organization and Regional West Health Services will have the remaining 12%. There is not a clear plan of finance and according to management the debt will be non-recourse and not on parity with Poudre's outstanding bonds. However, Fitch believes the project could negatively affect current bondholders as Poudre's overall debt profile and leverage indicators will be significantly impacted.

Fitch will analyze the new issue and project as more information becomes available and will re-evaluate Poudre's credit strength at that time. This being said, Fitch believes Poudre's overall operations remain very strong and should continue to post solid margins and debt service coverage in line with historical performance.

Located in Fort Collins (CO), approximately 60 miles from Denver, Poudre operates 254 acute-care beds along with numerous other related entities. In 2002, Poudre reported total operating revenue of $224 million. Quarterly financial disclosure to Fitch has been excellent in terms of content and timeliness.