Fitch Rates Adventist Health System/Sunbelt, FL, Series 2006 A-B Bonds 'A+'.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- Fitch has assigned an underlying 'A+' rating to Adventist Health System/Sunbelt's (Adventist) $85.955 million Highlands County, FL, Health Facilities Authority hospital revenue refunding bonds refunding bond A bond that is issued for the purpose of retiring an outstanding bond. Issuers refund bond issues to reduce financing costs, eliminate covenants, and alter maturities. See also crossover refunding bonds, prerefunding. , series 2006 A (insured by Financial Security Assurance Inc.), and $85.955 million Highlands County, FL, Health Facilities Authority hospital revenue refunding bonds, series 2006 B (insured by Financial Guaranty As a verb, to agree to be responsible for the payment of another's debt or the performance of another's duty, liability, or obligation if that person does not perform as he or she is legally obligated to do; to assume the responsibility of a guarantor; to warrant. Insurance Company). Proceeds of the series 2006 A and B bonds will be used to refund Adventist's series 2001 bonds. The bonds are expected to be priced the week of March 27, through negotiation, led by Ziegler Capital Markets Group. Fitch also affirms the 'A+' rating on Adventist's outstanding debt listed below, and upgrades its short-term rating to 'F1+'. The Rating Outlook is Stable. Fitch upgrades Adventist's short-term rating on the $68 million series 2003C bonds and the $85 million series 2002 bonds to 'F1+'. The F1+ rating is based on Adventist's strong internal liquidity position and management's procedures in place to access funds in case of an unremarketed put. Adventist has solid liquidity with $2.15 billion as of June 30, 2005. Of the $2.15 billion, $1.074 billion was invested in short duration high-grade fixed-income and money market funds, which Fitch views as highly liquid. Fitch believes Adventist's treasury function is sophisticated with a dedicated staff of three full-time traders and a trading desk Trading Desk A desk where transactions for buying and selling securities occur. Trading desks can be found in most organizations (banks, finance companies, etc.) involved in trading investment instruments such as equities, fixed-income securities, futures, commodities and foreign in the hospital's headquarters. The 'A+' rating is based on Adventist's improved financial profile, increased revenue diversity, and strong management practices. Since Fitch's initial rating in September 2003, Adventist has demonstrated continued improvement in profitability and cash flow that has led to a stronger liquidity position. Total revenue has increased at an average annual rate of 18% over the last four years due to volume growth, new facilities, and renegotiation of managed-care contracts. Operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: increased to 4.6% in fiscal year 2005(FY2005) (unaudited) from 4% in fiscal 2004. Strong 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 of $621 million in fiscal 2004 has led to solid debt service coverage of 4.6 times(x) and takes into account debt service on the expected $250 million of new money in June 2006. The system has improved its revenue and profitability diversity with the Florida Hospital division comprising 33% of the system's EBITDA in 2004 from 53% in 1999. Fitch views Adventist's management practices favorably fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. due to its success in integrating new facilities and improving operational performance in a short period. Financial disclosure and reporting capabilities are also one of the best in Fitch's portfolio. Other best management practices include asset liability management, managing the investment portfolio as a business unit, implementing a formal capital allocation model, and focusing on quality initiatives. Credit concerns remain Adventist's above average debt burden: future capital needs, competitive Denver market, and rising malpractice malpractice, failure to provide professional services with the skill usually exhibited by responsible and careful members of the profession, resulting in injury, loss, or damage to the party contracting those services. costs. Adventist's debt burden is somewhat high with pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma maximum annual debt service (MADS) at approximately 4.2% of total revenue and debt to capitalization of 53%. However, debt ratios have improved since 1999. Most of Adventist's facilities are located in fast growing service areas, most notably the Orlando area. Management will be challenged with balancing the need for additional capacity due to increased demand. The Orlando region anticipates adding 500 beds over the next five years. Fitch is concerned about the competitive environment of the Denver market. However, financial performance at the Denver facilities is showing improvement through year-end 2005. Fitch believes there will be more pressure in this market for reinvestment Reinvestment Using dividends, interest and capital gains earned in an investment or mutual fund to purchase additional shares or units, rather than receiving the distributions in cash. 1. In terms of stocks, it is the reinvestment of dividends to purchase additional shares. in plant due to the competition in the area. Adventist is exposed to the rising malpractice premium environment, especially in Florida where it has not only increased costs, but has caused physician recruitment and retention challenges. Fitch believes that formal implementation of all relevant provisions of Sarbanes Oxley is a best management practice. Adventist has not formerly implemented the provisions of SOX (1) (Schema for Object-oriented XML) An XML schema developed by Veo Systems and Muzino Communications, which was submitted to the W3C. SOX is based on DTD, but adds data typing and reuse mechanisms. at this time. However, Fitch believes that management has taken action to standardize stan·dard·ize v. 1. To cause to conform to a standard. 2. To evaluate by comparing with a standard. internal controls in financial reporting particularly in revenue recognition. Fitch views this positively. Adventist Health System The Adventist Health System is the organisation responsible for overseeing matters related to Hospitals and other medical facilities, related to the Seventh-day Adventist Church within the United States. has utilized numerous derivative instruments Derivative instruments Contracts such as options and futures whose price is derived from the price of an underlying financial asset. totaling a notional amount The notional amount (or notional principal amount or notional value) on a financial instrument is the nominal or face amount that is used to calculate payments made on that instrument. This amount generally does not change hands and is thus referred to as notional. of approximately $2.21 billion. As of Dec. 31, 2005, the mark to market value of Adventist's derivative portfolio was $118 million. AHS' utilizes multiple counterparties Counterparties The parties on either side of an interest rate swap or a currency, equity or commodity swap, or to an options or futures position. , which Fitch views favorably. Although the current market value of derivative instruments are negative, Fitch believes that Adventist's sophisticated treasury function, favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. termination provisions, sound cash position, and excellent monitoring system of its derivatives serve to mitigate the risk of large termination payments. Adventist's derivative strategy is based on attaining lower cost of capital while in a rising interest rate environment. Fitch believes Adventist has the balance sheet strength and management expertise to employ an aggressive derivative strategy. Fitch believes Adventist's financial performance will continue to exhibit an improving trend over the near-term. The Rating Outlook is Stable. Headquartered in Winter Park, FL, Adventist operates 38 hospitals in 10 states. The Florida Hospital region comprised 35% of net operating revenue operating revenue Revenue from any regular source. Revenue from sales is adjusted for discounts and returns when calculating operating revenue. Compare other revenue. of the system in fiscal 2003 and includes the largest hospital in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. ; Florida Hospital Orlando Located in Orlando, Florida, Florida Hospital Orlando uses the latest technology to treat over 32,000 inpatients and 53,600 outpatients annually. This 800+ bed, acute-care community hospital also serves as a major tertiary facility for much of the Southeast. . Adventist covenants to provide bondholders with unaudited quarterly statements within 45 days at quarter end, and audited annual statements within 150 days of fiscal year-end Fiscal Year-End The completion of a one-year, or 12-month, accounting period. Notes: The reason that a company's fiscal year often differs from the calendar year and does not close on Dec 31, is due to the nature of company's needs. . Adventist's disclosure to the NRMSIRs occurs both annually and quarterly, which Fitch views favorably. Fitch affirms the following Adventist's outstanding debt 'A+': --$33,000,000 Orange County, FL Health Facilities Authority (Adventist Health System/Sunbelt, Inc.) hospital revenue bonds Hospital revenue bond A bond issued to finance construction of a hospital by a municipal or state agency. hospital revenue bond Tax-exempt debt issued by a city, county, state, or hospital authority with debt service guaranteed by hospital , series 1991A (insured: Ambac Assurance Corp.); --$32,000,000 Orange County, FL Health Facilities Authority (Adventist Health System/Sunbelt, Inc.) hospital revenue bonds, series 1991B (insured: Financial Security Assurance); --$3,990,000 The Health and Educational Facilities Board of the Metropolitan Government of Nashville and Davidson County Davidson County is the name of two counties in the United States:
--$35,800,000 Orange County, FL Health Facilities Authority (Adventist Health System/Sunbelt, Inc.) hospital revenue bonds, series 1992 (insured: Financial Security Assurance); --$1,700,000 Tarrant County, Texas Tarrant County is a county located in the U.S. state of Texas. As of 2000, the population was 1,446,219. Its county seat is Fort Worth6. Tarrant County is the second most populous county in the Dallas/Fort Worth Metroplex and contains its second largest principal city. Health Facilities Development Corporation (Adventist Health System/Sunbelt, Inc.) hospital revenue bonds, series 1992 (insured: Financial Security Assurance); --$32,550,000 Volusia County, FL Health Facilities Authority (Memorial Health Systems Project) hospital facilities revenue refunding and improvement bonds, series 1994 (insured: Ambac Assurance Corp.); --$149,185,000 Orange County, FL Health Facilities Authority (Adventist Health System/Sunbelt Obligated ob·li·gate tr.v. ob·li·gat·ed, ob·li·gat·ing, ob·li·gates 1. To bind, compel, or constrain by a social, legal, or moral tie. See Synonyms at force. 2. To cause to be grateful or indebted; oblige. Group) hospital revenue bonds, series 1995 (insured: Ambac Assurance Corp.); --$6,155,000 Hospital Authority of Gordon County, GA (Adventist Health System/Sunbelt Obligated Group) revenue anticipation certificates, series 1995 (insured: MBIA MBIA Montana Building Industry Association MBIA Municipal Bond Insurance Association MBIA Michigan Boating Industries Association MBIA Municipal Bond Investors Assurance MBIA Massachusetts Brain Injury Association MBIA Maryland Business Incubation Association Insurance Corp.); --$4,795,000 Tarrant County, TX Health Facilities Development Corporation (Adventist Health System/Sunbelt Obligated Group) hospital revenue bonds, series 1995 (insured: MBIA Insurance Corp.); --$24,005,000 Copperas Cove Copperas Cove (kŏp`ərəs), town (1990 pop. 24,079), Coryell co., central Tex. In a farm and ranch area, the town owes much of its existence to U.S. Fort Hood, which it adjoins. , TX Health Facilities Development Corporation (Adventist Health System/Sunbelt Obligated Group) hospital revenue bonds, series 1995 (insured: MBIA Insurance Corp.); --$4,375,000 The Health and Educational Facilities Board of the Metropolitan Government of Nashville and Davidson County, TN (Adventist Health System/Sunbelt Obligated Group) hospital revenue bonds, series 1995 (insured: MBIA Insurance Corp.); --$15,425,000 Hospital Authority of the City of Smyrna GA (Emory-Adventist Hospital at Smyrna Project) revenue certificates, series 1996 (insured: Ambac Assurance Corp.); --$42,280,000 Volusia County, FL Health Facilities Authority Hospital Facilities (Memorial Health Systems Project) revenue bonds, series 1996 (insured: Ambac Assurance Corp.); --$101,190,000 Highlands County, FL Health Facilities Authority (Adventist Health System/Sunbelt Obligated Group) hospital revenue bonds, series 1998; --$14,535,000 Tarrant County, TX Health Facilities Development Corporation (Adventist Health System/Sunbelt Obligated Group), hospital revenue bonds, series 1998; --$3,690,000 The Health and Educational Facilities Board of the Metropolitan Government of Nashville and Davidson County, TN (Adventist Health System/Sunbelt Obligated Group) hospital revenue bonds, series 1998; --$187,805,000 Illinois Development Finance Authority (Adventist Health System/Sunbelt Obligated Group) hospital revenue bonds, series 1999; --$54,625,000 Illinois Development Finance Authority hospital revenue bonds, series 2000A (insured: MBIA Insurance Corp.); --$60,000,000 Illinois Development Finance Authority hospital revenue bonds periodic auction rate securities (PARS), series 2000B (insured: MBIA Insurance Corp.); --$165,190,000 Highlands County, FL Health Facilities Authority (Adventist Health System/Sunbelt Obligated Group) hospital revenue bonds, series 2001A (Bonds to be refunded with the proceeds of the 2006 A-B A-B Air-Britain (UK-based aviation historical society) A-B Research Centre Applied Biocatalysis (Graz, Austria) Bonds); --$59,700,000 Highlands County FL Health Facilities Authority (Adventist Health System/Sunbelt Obligated Group) hospital revenue bonds, series 2001B periodic auction reset securities (PARS) (insured: Ambac Assurance Corp.); --$160,000,000 Orange County, FL Health Facilities Authority (Adventist Health System/Sunbelt Obligated Group) hospital revenue bonds, series 2002; --$85,000,000 Highlands County Health Facilities Authority (Adventist Health System/Sunbelt Obligated Group) hospital revenue bonds, series 2002 long-term adjustable securities extendable rate (LASERS) 'A+/F1+'; --$70,215,000 Highlands County, FL Health Facilities Authority (Adventist Health System/Sunbelt Obligated Group) hospital revenue bonds, series 2002B; --$68,015,000 Highlands County Health Facilities Authority (Adventist Health System/Sunbelt Obligated Group) hospital revenue bonds, series 2003B (letter of credit: SunTrust Bank) 'A+/F1+'; --$68,095,000 Highlands County Health Facilities Authority (Adventist Health System/Sunbelt Obligated Group) hospital revenue bonds, series 2003C 'A+/F1+'; --$145,000,000 Highlands County Health Facilities Authority (Adventist Health System/Sunbelt Obligated Group) hospital revenue bonds, series 2003D; --$50,000,000 Highlands County Health Facilities Authority (Adventist Health System/Sunbelt Obligated Group) hospital revenue bonds, series 2004A (Auction Reset Securities); --$50,000,000 Colorado Health Facilities Authority (Adventist Health System/Sunbelt Obligated Group) hospital revenue bonds, series 2004B variable rate demand bonds (letter of credit: SunTrust Bank) 'A+/F1+'; --$50,000,000 Kansas Development Finance Authority (Adventist Health System/Sunbelt Obligated Group) hospital revenue bonds, series 2004C variable rate demand bonds (letter of credit: SunTrust Bank)'A+/F1+'; --$64,345,000 Highlands County, FL Health Facilities Authority hospital revenue refunding bonds, series 2005A (Adventist Health System/Sunbelt Obligated Group); --$105,990,000 Highlands County, FL Health Facilities Authority (Adventist Health System/Sunbelt Obligated Group) hospital revenue refunding bonds, series 2005B; --$62,460,000 Highlands County, FL Health Facilities Authority hospital revenue refunding bonds, series 2005C (Adventist Health System/Sunbelt Obligated Group); --$100,000,000 Highlands County, FL Health Facilities Authority hospital revenue refunding bonds, series 2005D (Adventist Health System/Sunbelt Obligated Group); --$62,500,000 Highlands County, FL Health Facilities Authority (Adventist Health System/Sunbelt Obligated Group) hospital revenue bonds, auction reset securities, series 2005 E; --$62,500,000 Highlands County, FL Health Facilities Authority hospital revenue bonds, auction reset securities, series 2005 F (Adventist Health System/Sunbelt Obligated Group); --$50,000,000 Highlands County, FL Health Facilities Authority (Adventist Health System/Sunbelt Obligated Group) hospital revenue bonds, auction reset securities, series 2005 G; --$50,000,000 Highlands County, FL Health Facilities Authority (Adventist Health System/Sunbelt Obligated Group) hospital revenue bonds, auction reset securities, series 2005 H; --$185,000,000 Highlands County, FL Health Facilities Authority hospital revenue refunding bonds, long-term adjustable-rate securities, series 2005 I. Ambac Assurance Corp., Financial Security Assurance, Inc., and MBIA Insurance Corp. all have an Issuer Financial Strength (IFS) of 'AAA' by Fitch. Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. 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 Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from the 'Code of Conduct' section of this site. |
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