Fitch Plcs Fletcher Allen -Vermont- $149.1MM Bonds On Rtg Watch Negative.Business Editors NEW YORK--(BUSINESS WIRE)--Aug. 8, 2002 Fletcher Allen Health Care Fletcher Allen Health Care is a tertiary referral hospital for Vermont and northern New York State, a Level I Trauma Center, and a teaching hospital in alliance with the University of Vermont College of Medicine. , Inc.'s (FAHC FAHC Fletcher Allen Health Care FAHC Filipino Association for Health Careers FAHC Finnish/American Heritage Center FAHC Fully Allocated Historical Costs ) approximately $149.1 million outstanding bonds issued by the Vermont Educational & Health Buildings Financing Agency and rated 'A-' by Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. (issues listed below), are placed on Rating Watch Negative, indicating the rating may be lowered in the near-term. Placement of a bond rating on Rating Watch Negative, however, does not mean that a rating change is inevitable. Fitch's 'A-' rating is an underlying rating. The bonds are insured by Ambac Assurance Co., whose insurer financial strength is rated 'AAA' by Fitch. The placement of the bonds on Rating Watch Negative is based on a significant disruption in executive leadership at FAHC caused by several concurrent investigations into FAHC by the U.S. Attorney's office, the state of Vermont attorney general Vermont Attorney General is an elected office in Vermont, United States. It was created by an act of the legislature in 1790, repealed in 1797, and revived in 1904. List of Vermont Attorneys General
The officer of a firm responsible for day-to-day management, usually the president or an executive vice-president. will oversee the operations and direction of the system. FAHC currently has a search open for a new chief financial officer (CFO See Chief Financial Officer. ), which has been filled for the last 12 months via an interim executive from The Hunter Group. The investigations stem from allegations that management intentionally evaded certificate of need (CON) regulatory review for capital projects that may have required such review before funding and construction of the projects. Most of the projects under investigation are related to FAHC's $150 million series 2000A and 2000B bond financings. Management already settled one investigation with a $300,000 administrative payment this past July related to a parking garage that was financed with an off balance sheet transaction via a special purpose entity. A CON for the parking garage was subsequently issued by the state of Vermont on July 15, 2002. Fitch's concerns related to the investigations are that key strategic decisions for FAHC, including the CFO search, will be delayed while there is in effect a CEO vacancy in the organization and as the board and management focus on the investigations rather than on strategic initiatives. In addition, FAHC could be the recipient of additional penalties. As of March 31, 2002, FAHC continues to exhibit characteristics consistent with its 'A-' underlying rating, including a dominant 80% market share, 92 days cash on hand, 3% operating margin, and 3.2 times(x) maximum annual debt service (MADS) coverage by EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become . These indicators are consistent with FAHC's audited Sept. 30, 2001 results of 108 days cash on hand, 3.8% operating margin, and 3.3x MADS coverage by EBITDA. Management is expected to send Fitch June 30, 2002 third quarter financial statements within two weeks. Fitch will continue to monitor the situation closely and determine through subsequent quarterly financial statement review if the investigations, and events surrounding the investigation, are having a material adverse impact on operations. FAHC is an integrated health care integrated health care, n healthcare services combining the best of conventional and complementary health care. network, providing hospital and physician services from three main campuses and twenty-nine satellite clinics. FAHC's flagship is a full-service tertiary and quaternary quaternary /qua·ter·nary/ (kwah´ter-nar?e) 1. fourth in order. 2. containing four elements or groups. qua·ter·nar·y adj. 1. Consisting of four; in fours. academic medical center with 556 licensed beds located in Burlington, Vermont. Total revenues for the system in fiscal 2001 were $525.6 million. FAHC's disclosure to Fitch has been timely and thorough. Outstanding Issues: --$99,137,000 Vermont Educational & Health Buildings Financing Agency, hospital revenue bonds (Fletcher Allen Health Care Project) series 2000A (insured: Ambac); --$50,000,000 Vermont Educational & Health Buildings Financing Agency, variable-rate hospital revenue bonds (Fletcher Allen Health Care Project) series 2000B (insured: Ambac). |
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