Fitch Rates Johns Hopkins Utilities --Maryland-- 2005A Bonds 'AA-'; 2005B 'AA+'.

NEW YORK -- Fitch Ratings has assigned an 'AA-' rating to the Maryland Health and Higher Educational Facilities Authority revenue bonds listed below:

-- $27,284,000 revenue bonds (Johns Hopkins Medical Institutions Utilities Program Issue) series 2005A;

and an 'AA+' rating to the bonds below:

-- $27,284,000 revenue bonds (Johns Hopkins Medical Institutions Utilities Program Issue) series 2005B.

The 'AA-' rating on the series 2005A bonds is based on a guarantee by The Johns Hopkins Hospital (the Hospital) and the 'AA+' rating on the series 2005B bonds is based on a guarantee by The Johns Hopkins University (University or JHU). Fitch has also affirmed the rating on outstanding debt for both entities, which are listed below. Fitch notes that Johns Hopkins Health System has other outstanding debt that do not have underlying ratings by Fitch including the series 1985, 1996, and 1998 bonds. The Rating Outlook is Stable. The bonds are expected to sell the week of June 13 via negotiation by Merrill Lynch & Co. and Legg Mason Wood Walker.

This transaction will form a limited liability company jointly owned by the Hospital and the University to acquire the existing power plant on the Johns Hopkins campus. The Series 2005 bond proceeds, in addition to funds from a pooled loan, are projected to total $101 million and will fund the acquisition and expansion of the power plant. Repayment of the debt, along with operating and maintenance cost of the utility facilities, will be charged to the Hospital and University based on a use based formula. In addition, the debt will be severally guaranteed by the Hospital and University.

The 'AA-' rating reflects Johns Hopkins Health System's (JHHS) very strong clinical reputation, close working relationship with the University, improved operating performance, and recent favorable increases approved by the Maryland Health Services Cost Review Commission (HSCRC). Johns Hopkins Hospital, the health system's flagship hospital has been ranked as the nation's best hospital by U.S. News and World Report for the 14th consecutive year.

JHHS is world renown for its patient care in many service lines providing tertiary and quaternary care. The hospital's strong clinical reputation is further enhanced by the close relationship with the University, which is the number one recipient of research funding from the National Institutes of Health. JHHS' operating performance continues to improve with a 1.1% operating margin through the nine months ended March 31, 2005 compared to 0.6% in fiscal 2001. Improved profitability has been driven by rising volume and solid rate increases from the HSCRC, and maintaining costs below the peer group average.

The board has approved several large capital projects in the hospital's ten year capital plan that totals $700 million. The main building project includes the construction of two new clinical towers. Fitch views the capital plan favorably as the facilities are fairly dated and the new clinical towers should enhance efficiency. Fitch also views favorably the approval of the additional capital costs associated with the new facilities from the HSCRC, which will be factored into the hospital's rate base as the facilities are placed in service. Of concern is the length and scope of the project, which entails demolishing nine existing buildings and renovating space in five buildings. Fitch believes management will be challenged in minimizing the disruption to current services. Although JHHS' profitability has improved, its overall financial profile remains weak for an 'AA' category credit. However, its rating is supported by its strong qualitative factors.

The 'AA+' rating is primarily supported by JHU's prominent position in U.S. government-funded research, positive operating margins, demonstrated fundraising abilities, and strong student quality indicators. Approximately 60% of fiscal year 2004's unrestricted revenues were derived from contracts and grants with most funding coming from federal agencies and departments. Over the past five years, federal funding to JHU has increased 53.7%. Large funding increases in federal funding experienced from 1999 through 2003 are not expected to continue and JHU has incorporated a slower growth in its budget process. The significant funding from contracts and grants, which include a recovery of indirect cost, has contributed to JHU's positive operating performance.

For the past five fiscal years, the average annual operating margin was 3.4%. Variance in margins has often been attributed to the timing of unrestricted gifts that are received in one year but the expenses are recorded in a subsequent year. In addition, JHU's financial strength is expected to increase with the completion of an approximately $2 billion capital campaign. The primary credit concerns are JHU's need for additional facilities and its ability to maintain research funding. JHU has a long-term capital plan, which is to be funded with a variety of sources, including additional debt. The amount of debt to be issued will be guided by the institution's board adopted debt policy. The debt burden, as measured by MADS to unrestricted revenues, is low at 2.0%.

Outstanding debt affirmed by Fitch:

Maryland Health & Higher Educational Facilities Authority (Johns Hopkins Hospital)

-- $100,944,000 revenue bonds, series 2003 'AA-';

-- $54,310,000 lease revenue bonds, series 2003A 'AA-';

-- $95,299,000 revenue bonds, series 2001 'AA-';

-- $50,921,000 revenue bonds, series 1999 'AA-';

-- $44,883,000 revenue bonds, series 1990 'AA-'.

Maryland Health & Higher Educational Facilities Authority (Johns Hopkins University)

-- $5,755,000 revenue bonds, series 1983 'AA+';

-- $13,218,000 refunding bonds, series 1997 'AA+';

-- $155,552,000 refunding bonds, series 1998 'AA+';

-- $19,096,000 refunding bonds, series 2001A 'AA+';

-- $84,397,000 refunding bonds, series 2001B 'AA+';

-- $105,140,000 revenue bonds, series 2002A 'AA+';

-- $93,830,000 revenue bonds, series 2004A 'AA+';

-- $75,000,000 revenue bonds, series 2005A 'AA+';

Other outstanding debt rated by Fitch:

Maryland Health & Higher Educational Facilities Authority commercial paper revenue notes, Johns Hopkins Hospital

-- $74,840,000 series A(1) (line of credit from Bank of America) 'F1+';

-- $101,565,000 series B(1) (line of credit from Wachovia Bank) 'F1+';

-- $60,000,000 series C(1) (line of credit from SunTrust Bank) 'F1+'.

Maryland Health & Higher Educational Facilities Authority (Johns Hopkins University)

-- $400,000,000 commercial paper program, series A,B, C and D 'F1+'.

(1) The short term ratings for the commercial paper notes are based on both the internal liquidity support provided by the Johns Hopkins Health System, which covers the interest portion of the commercial paper notes and external liquidity support, which covers the principal amount of the notes.