Fitch Affs Underlying 'A-' Rtg on $39MM Immanuel Retirement Community, NE Ser 2000 Bnds.

NEW YORK -- Fitch affirms its 'A-' underlying rating on the $33.2 million Hospital Authority No. 1 of Lancaster County, Nebraska variable-rate health facilities revenue bonds (Immanuel Health Systems - Williamsburg Project) series 2000A, and $5.5 million Hospital Authority No. 1 of Sarpy County, Nebraska variable-rate health facilities revenue bonds (Immanuel Health Systems - Trinity Village Project) series 2000B. Both series of bonds were issued on behalf of Immanuel Retirement Communities and Immanuel Health Systems, Inc. Obligated Group (IHS) and underwritten by Herbert J. Sims & Co., Inc. The credit rating is based on the underlying credit characteristics of IHS and does not consider the financial strength of Allied Irish Bank, N.A. which provided the letters of credit to support the bonds. Fitch was not asked to provide enhanced ratings on these bonds. The Rating Outlook is Stable.

The 'A-' underlying rating is supported by IHS' strong cash reserves, its affiliation with Alegent Health, improved occupancies and limited competition. Liquidity as measured by days cash on hand remains solid. At Sept. 30, 2006 IHS' $48.8 million of unrestricted cash and investments equates to 1,058 days. However, using Fitch's other liquidity measures of cash-to-debt and cushion ratio, IHS' respective ratios of 83% and 10.9% are weaker than the 2006 'A' medians of 108% and 12.9%. Liquidity growth, while improved since Fitch's last review, has lagged projections due to a slower fill-up at Pacific Springs, a facility acquired out of bankruptcy for approximately $8 million. IHS is 50% co-sponsor with Catholic Health Initiatives (whose revenue bonds are rated 'AA' by Fitch) of Alegent Health System, which includes nine acute care hospitals, more than 100 sites of service, and over 1,200 physicians on its medical staff. IHS receives significant referrals from Alegent and benefits from its affiliation with the health system.

Overall system occupancy improved to 96% as of November 2006 with a wait list on independent living units of 97 people. In addition, sold and occupied units at the Pacific Springs facility was 96% in November. Finally, IHS benefits from limited competition senior living facilities with just one other CCRC (continuing care retirement community) facility in the market area.

Primary concerns are negative bottom-line operating performance, a high debt burden and relatively weak debt service coverage in fiscal 2006. While IHS' bottom-line operating performance has steadily improved, it compares unfavorably to Fitch's 'A' rated medians. In fiscal 2006, excess income of negative $2.7 million resulted in a negative excess margin of 13.3%, which is an improvement from fiscal 2004's negative 29.8% excess margin. Sizable depreciation expense related to the opening of several facilities from 1999-2002 has had a negative impact on operating results. Similarly, debt burden has been falling but remains high as indicated by maximum annual debt service (MADS) as a percentage of revenues of approximately 21.6% in fiscal 2006; down from 26.5% in fiscal 2004. Debt service coverage of MADS in fiscal 2006 is 1.6 times (x) due to lower than average receipt of entrance fees.

Management's decision to maintain its sizable liquidity position affects impacts these capital ratios negatively. Fitch believes that IHS' operating performance and leverage position should continue to improve over the near term.

Located in Omaha, Nebraska, IHS provides Type C and independent and assisted living units through its five communities with a total of 409 independent living units and 150 assisted living units. Under the series 1997 bonds, IHS is only required to disclose annual audited financial statements and utilization data within 150 days of each fiscal year-end to the Master Trustee. Fitch has received quarterly information on a timely basis.

Fitch's rating definitions and the terms of use 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 are also available from the 'Code of Conduct' section of this site.