Fitch Rates Memorial Sloan-Kettering Cancer Center $215MM Series 2006 Bonds 'AA'; Outlook Stable.

NEW YORK -- Fitch has assigned an 'AA' rating to the $215 million Dormitory Authority of the State of New York Memorial Sloan-Kettering Cancer Center (MSKCC) revenue bonds, Series 2006 listed below. The series 2006 bonds will be issued in two separate series as fixed-rate bonds. In addition, Fitch has affirmed its underlying 'AA' rating Memorial Sloan-Kettering Cancer Center's (MSKCC) approximately $1.088 billion outstanding debt, as listed below. The Rating Outlook is Stable.

Proceeds for series 2006 1 bonds will be used finance a portion of the costs of Phase II of the New Research Building; the acquisition of 96 apartments in the Southtown Housing complex on Roosevelt Island, and other capital projects of MSKCC. The proceeds for the series 2006 2 bonds will be used to refund a portion MSKCC's series 2003 bond issue. Final legal documents for the series 2006 transaction were not provided to Fitch and the rating assumes no weakening of the legal structure for the bonds. The series 2006 bonds are on parity with the MSKCC's outstanding debt and will be issued as an unsecured general obligation of the Medical Center. Each bond series for MSKCC has a different security pledge, which will be further explained in Fitch's new issue report. MSKCC currently has no swaps outstanding and no swaps were executed in conjunction with this new bond issue. The bonds are expected to price the week of June 5th via negotiation led by Goldman, Sachs & Co.

The 'AA' rating is based on MSKCC's excellent liquidity, strong fundraising ability, highly regarded clinical quality and reputation, expanding patient services, and increasing patient volume. At fiscal 2005, MSKCC had $2.7 billion in unrestricted cash and investments, translating to a very high 712.7 days cash on hand, a pro forma cushion ratio of 37.2 times (x), and a pro forma cash to debt of approximately 225%. Actual maximum annual debt service (MADS) coverage ($117.753 million, which occurs in 2036 at the end of the life of the bonds) for fiscal 2005, was 2.7x, up from 2.3x for fiscal 2004. Fueled by MSKCC's standing as one of the premier cancer treatment centers in the world, total philanthropic donations have averaged an impressive $198.5 million over the last five fiscal years. In fiscal 2005, MSKCC's admissions, clinic visits, and surgical cases increased by 5.4%, 6.7% and 4.0%, respectively, from fiscal 2004.

Primary credit concerns for MSKCC include a reliance on endowment earnings and fundraising to fund operations and future capital plans. MSKCC has historically relied on investment income from its endowment and philanthropy to make up for the insufficient reimbursement MSKCC receives for cancer care and rearch. Investment income as a percent of excess income (including the investment income allocated as operating income) for fiscal 2005 was a very high 86.3%. Since fiscal 2000, MSKCC has spent approximately $1.35 billion on capital projects, and current capital plans call for an additional $2.3 billion of spending through fiscal 2016. Funding for these future projects is expected to come from future tax-exempt borrowings, philanthropy, and operating cash-flow.

The Stable Rating Outlook is based on Fitch's expectation that MSKCC will continue to be the leading cancer treatment provider in the greater New York City area, as demonstrated by growing utilization indicators and its strong philanthropic program. MSKCC is budgeting for a bottom-line income of $88.4 million (5% excess margin) for fiscal 2006. Through the three months of fiscal 2006, MSKCC posted an excess margin of 13.7% ($66.4 million), compared to budgeted expectations of 11.1% ($47.3 million).

MSKCC includes a 514-licensed bed specialty hospital located on the Upper East Side of Manhattan, an institute for cancer research, a newly formed graduate school, and other affiliates following the mission of the prevention, treatment and cure of cancer. MSKCC had total revenue and gains of over $1.6 billion in fiscal 2005. MSKCC covenants to provide both annual and quarterly disclosure including balance sheet, income statement, cash flows, utilization statistics, and management discussion and analysis to to the Nationally Recognized Municipal Securities Information Repositories (NRMSIRs) and financial disclosure has been thorough in terms of timeliness and format. MSKCC has been disclosing annual and quarterly financial statements through Digital Assurance Certification LLC (DAC) at www.dacbond.com, which Fitch views positively. Quarterly statements include a balance sheet, income statement, utilization statistics, cash flows and a management discussion and analysis.

New debt rated 'AA':

-- $100,000,000 Dormitory Authority of the State of New York Memorial Sloan-Kettering Cancer Center revenue bonds, series 2006-1;

-- $115,000,000 Dormitory Authority of the State of New York Memorial Sloan-Kettering Cancer Center revenue bonds, series 2006-2.

Outstanding debt:

-- $488,326,000 Dormitory Authority of the State of New York Memorial Sloan-Kettering Cancer Center revenue bonds, series 2003 (insured by MBIA, rated 'AAA' by Fitch);(1)

-- $450,000,000 Dormitory Authority of the State of New York Memorial Sloan-Kettering Cancer Center revenue bonds, series 2002A-1, 2002A-2, and 2002A-3 (insured by Ambac, rated 'AAA' by Fitch);

-- $148,830,000 Dormitory Authority of the State of New York Memorial Sloan-Kettering Cancer Center revenue bonds, series 1998 (insured by MBIA, rated 'AAA' by Fitch).

(1) The series 2006-2 bonds will be used to refund a portion of these bonds.

Fitch's rating definitions and the terms of use 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 are also available from the 'Code of Conduct' section of this site.