Fitch Rates Banner Health (Arizona) Bonds at 'AA-'.SAN FRANCISCO San Francisco (săn frănsĭs`kō), city (1990 pop. 723,959), coextensive with San Francisco co., W Calif., on the tip of a peninsula between the Pacific Ocean and San Francisco Bay, which are connected by the strait known as the Golden -- 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. assigns a rating of 'AA-' to the expected $600 million Arizona Health Facilities Authority Revenue Bonds (Banner Health) Series 2007 issue, expected to be sized as follows: --$300,000,000 Series 2007A; --$100,000,000 Series 2007B-1 Index Bonds; --$100,000,000 Series 2007B-2 Index Bonds; --$100,000,000 Series 2007B-3 Index Bonds. In addition, Fitch affirms the underlying 'AA-' ratings on approximately $1.2 billion in outstanding revenue bonds issued on behalf of Banner Health (BH). The Rating Outlook is Stable. The series 2007 bond proceeds will fund various expansion and renovation projects in the Phoenix, Arizona market, including the construction of a new 200-bed patient care tower at Banner Thunderbird thunderbird In North American Indian mythology, a powerful spirit in the form of a bird that watered the earth and made vegetation grow. Lightning was believed to flash from its eyes or beak, and the beating of its wings was thought to represent rolling thunder. Medical Center in Glendale (approx. $287 million), and the construction of a new 120-bed children's hospital on the campus of Banner Desert Medical Center in Mesa, (approx. $252 million), and one project in its Western region, the renovation of Torrington Community Hospital (approx. $9 million). While the bond structure has yet to be determined, BH expects to utilize uninsured, traditional fixed rate bonds and indexed floating rate bonds that will be synthetically fixed through a floating-to-fixed rate swap. The bonds are expected to price the week of May 1, through negotiation by Morgan Stanley & Co Inc. and Merrill Lynch as co-senior managers. The 'AA-' rating is supported by BH's strong operating performance and debt service coverage, good liquidity, and a leading market position in its two core markets in Arizona and Colorado. Based on unaudited 2006 (fiscal year ending Dec 31.) financial statements, BH earned $150.2 million from operations (4.8% operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: ). Through the two months ended Feb. 28, 2007 (the interim period), BH had a $28.3 million operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. (5.2% operating margin). The excess margin and earnings before interest, taxes, depreciation and amortization Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP metric that can be used to evaluate a company's profitability.
The phrase pro forma maximum annual debt service (MADS), including the $600 million of new debt, is expected to be a strong 4.4 times (x) in 2006. Pro forma MADS of $104.2 million represents 3.3% of fiscal 2006 total revenues and is slightly above Fitch's 'AA' median of 2.8%. Pro forma debt-to-capitalization remains manageable at 45.8% at Dec. 31, 2006. BH's liquidity relative to expenses increased to a solid 250 days cash on hand at Dec. 31, 2006, although pro forma cash-to-debt is somewhat light for the rating category at 100%. Primary credit concerns include increasing competition in BH's core markets, as well as its sizeable capital plans. In the Phoenix market, BH faces strong competition from its primary competitors including the new Mercy Gilbert Medical Center, a Catholic Healthcare West Catholic Healthcare West (CHW) is a California not-for-profit public benefit corporation that operates hospitals in California, Arizona, and Nevada[1]. As such, it is exempt from federal and state income taxes. (revenue bonds rated 'A+' by Fitch) hospital, which has had a negative impact on BH's utilization at Banner Desert Medical Center. In addition, Poudre Valley Health System's (revenue bonds rated 'BBB' by Fitch) new hospital opened in early 2007 and is expected to compete with BH's McKee Medical Center in Loveland, Colorado. Offsetting these concerns are the strong demographics of both markets and BH's recent acquisition of the 40-physician Big Thompson Medical group in Loveland. BH's strategic growth capital plan totals $1.1 Billion over the 2007-2011 period, which will be funded with this issuance and approximately $500 million in future bond issues. This sizable capital plan is part of BH's strategy to increase capacity and capture market share in its two core areas. The Stable Rating Outlook is based on Fitch's expectation that BH will continue to operate at or near current levels of profitability given its solid market presence in its core markets and growth characteristics of these markets. Fitch expects BH's operating margin to be somewhat depressed over the next three years due to BH's sizable capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. , and expects EBITDA margins to be maintained. Headquartered in Phoenix, Arizona, BH is a large, integrated health care integrated health care, n healthcare services combining the best of conventional and complementary health care. provider that owns, leases, and/or manages 20 hospitals and several other related health care entities. BH had total revenues of $3.12 billion in fiscal 2006. BH has agreed to provide certain quarterly financial information to bondholders, which Fitch views positively. The content of BH's annual disclosure to NRMSIRs includes utilization statistics, balance sheet, income statement, and statement of cash flows, but does not include management discussion and analysis. 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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