Fitch Rates $256MM Alexian Brothers Health System (Illinois) Revenue Bonds 'A'.

CHICAGO -- Fitch assigns an underlying 'A' rating to the $256 million of Illinois Finance Authority variable-rate demand revenue bonds (Alexian Brothers Health System), series 2005 A, B, and C (see list at the end of the press release). The series 2005 A and B bonds are expected to be issued in the auction-rate mode and the series 2005C is expected to be issued as variable-rate demand bonds. All three series of bonds are expected to be insured by FSA, whose insurer financial strength is rated 'AAA' by Fitch. In addition, Fitch expects to assign a short-term rating closer to the closing date to the series 2005C bonds based upon liquidity support to be provided by Harris Bank, NA. Fitch has also assigned an underlying 'A' rating to the outstanding bonds listed at the end of the press release. The Rating Outlook is Stable.

The bonds are expected to sell the week of Aug. 8 through negotiation led by Merrill Lynch Capital Markets, Inc. Bond proceeds will be used to refund a portion the series 1999 bonds issued through the Illinois Health Facilities Authority and to pay for costs of issuance. Upon closing, Alexian Brothers Health System will have approximately $430 million of total outstanding bonds.

The 'A' rating is supported by Alexian Brothers Health System's (ABHS) leading market share in the affluent, densely populated primary service area in the northwest suburbs of Chicago, strong operating performance, and growing clinical reputation. ABHS maintains a strong 44.7% market share in its 'core' service area, while the combined market share of its next three closest competitors was 27.5%. The core service area encompasses approximately 485,000 residents and is a major retail and employment center in the Chicago land area. ABHS' market position and operating performance has benefited from the integration of ABHS' two acute-care hospitals, Alexian Brothers Medical Center and St. Alexius Medical Center, which has led to solid operating margins of 1.9% in fiscal 2004 and 3.4% through the five months ended May 31, 2005. Furthermore, the operating cash flow margin has ranged from 10.4%-13.4% from 2001-2004, and management has established a 12%-14% cash flow target going forward. 2004 debt service coverage of pro forma MADS is solid at 3.6 times (x). ABHS' clinical capabilities and reputation have grown through physician recruitment and partnerships in neurosurgery, orthopedics, cardiology, behavioral health, and rehabilitation services. As a result, ABHS' utilization trends have shown steady growth from 2000-2004. Inpatient admissions have grown 12.5% from 32,235 in 2000 to 36,274 in 2004, while outpatient visits have increased 27% from 192,699 in 2000 to 245,006 in 2004.

Credit concerns include a competitive service area, future capital needs, and relatively high debt burden. While ABHS has improved its clinical services, the competitive landscape in the Chicago suburban market is fierce with several well capitalized providers investing in their physical plants and soliciting physician services. Competitors such as Central DuPage Health (hospital revenue bonds rated 'AA-' by Fitch) in Winfield and Northwest Community Hospital in Arlington Heights have recently made significant investments to in cardiac services. To remain competitive, ABHS plans to fund approximately $265 million of capital needs from 2005-2007 with operating cash flow. The projects will expand and enhance ABHS' outpatient and diagnostic capabilities. Additionally, ABHS is highly levered with pro forma MADS as a percentage of revenues of 4.1%, debt to capitalization of 49.8%, and cash to debt of 71.1% at fiscal 2004, which are below Fitch's 'A' median.

The Stable Outlook reflects ABHS' strong market position in the service area, which is supported by its two facilities and strong service mix. Fitch believes ABHS will continue to generate solid operating profitability and cash flow generation, which should allow the system to fund its capital needs without weakening balance sheet indicators.

In connection with the series 2005 bonds, ABHS has entered into three floating- to fixed-rate swaps effective June 17, 2005 with Merrill Lynch Capital Services (rated 'AA-/F1+' by Fitch) for notional amounts of that match each of the series 2005 bonds. The swaps are coterminous with the series 2005 bonds. The swap payments will be insured by FSA; however, the termination payments are not insured.

ABHS consists of two acute-care hospitals, a behavioral hospital, a rehabilitation hospital, and several long-term care facilities. The two acute-care hospitals have 566 total staffed beds and are located in Elk Grove Village, IL and Hoffman Estates, Illinois (approximately 25 and 30 miles northwest of Chicago, respectively). ABHS covenants to provide annual disclosure to bondholders and quarterly disclosure consisting of income statements, balance sheets, and cash flow information.

The following new issues are rated 'A' by Fitch:

-- $87,425,000 Illinois Finance Authority variable-rate demand revenue bonds, series 2005A (Alexian Brothers Health System) (1)(2)

-- $87,425,000 Illinois Finance Authority variable-rate demand revenue bonds, series 2005B (Alexian Brothers Health System) (1)(2)

-- $80,945,000 Illinois Finance Authority variable-rate demand revenue bonds, series 2005C (Alexian Brothers Health System) (1)(2)(3)

The following outstanding debt is rated 'A' by Fitch:

-- $80,945,000 Illinois Finance Authority variable-rate demand revenue bonds, series 2004 (Alexian Brothers Health System) (1)(4)

-- $280,610,000 Illinois Health Facilities Authority revenue bonds, series 1999 (Alexian Brothers Health System) (1)(2)(5)

-- $17,400,000 The Health, Educational and Housing Facilities Board of Signal Mountain, TN adjustable-rate revenue refunding bonds, series 1999 (Alexian Brothers Health System) (1)(6)

-- $13,000,000 Wisconsin Health Facilities Authority variable-rate demand bonds, series 1998A (Alexian Brothers Health System) (1)(4)

-- $18,170,000 Illinois Health Facilities Authority variable-rate demand revenue bonds, series 1985D (Alexian Brothers Health System) (1)(6)

(1) Underlying rating.

(2) Bonds are insured by FSA, whose insurer financial strength is rated 'AAA' by Fitch.

(3) Short-term rating expected to be assigned closer to the closing date based upon liquidity support to be provided by Harris Bank, NA.

(4) The bonds are backed by an irrevocable letter of credit from JP Morgan, which Fitch was not asked to rate.

(5) A portion of the series 1999 bonds are expected to be advance refunded by the series 2005 bonds. Upon closing of the series 2005, approximately $42.7 million of the series 1999 will remain outstanding.

(6) Bonds are supported by a standby bond purchase agreement provided by JP Morgan, which Fitch was not asked to rate.

Fitch's rating definitions are available on the agency's public web site, www.fitchratings.com. Published ratings, criteria and methodologies, and relevant policies and procedures are also available from this site, at all times. This document will remain on the public site for seven days.