Fitch Rates Nemours Foundation Series 2005 Bonds 'AAA'.

NEW YORK -- Fitch Ratings assigns a rating of 'AAA' to approximately $50,860,000 Delaware Health Facilities Authority auction rate revenue bonds, series 2005 and $42,330,000 Orange County (Florida) Health Facilities Authority revenue bonds, series 2005. Both series of bonds are to be sold on behalf of the Nemours Foundation (Nemours). The bonds are scheduled to be sold in January through negotiation by Banc of America Securities LLC. Bond proceeds will be used primarily to fund the purchase of two buildings and the construction of a parking garage in Wilmington, Delaware and to construct a specialty clinic in Orlando, Florida to be used by patients of Nemours' health facilities. The Rating Outlook is Stable.

The 'AAA' rating is supported primarily by Nemours' substantial liquidity, low debt burden, profitable operations for most of its years, and its relationship with the Alfred I. duPont Testamentary Trust (duPont Trust). Liquidity, as measured by Nemours' unrestricted and temporarily restricted cash and investments, is substantial at $503.4 million for fiscal 2003, compared with unrestricted expenses of $427.5 million and no outstanding long-term debt prior to the issuance of the series 2005 bonds. Maximum annual debt service for the series 2005 bonds is expected to be $5.3 million and would consume only 1.2% of fiscal 2003 unrestricted revenues. The low debt burden can be attributed to past funding of capital improvements through positive cash flows generated by operations and from funding by the duPont Trust.

Over the past five years, approximately 18%-26% of the revenues of Nemours' has been derived from annual distributions from the duPont Trust. As net patient revenues have grown over this period, the percentage of total revenues attributed to the duPont Trust distributions has declined. The percentage was 18% in fiscal 2003. After annual payments of less than $76,800, which will decline over time, Nemours will be the only remaining beneficiary of the duPont Trust. As of Dec. 31, 2003, the duPont Trust had a fund balance of $3.2 billion.

The primary credit concerns are Nemours' exposure to the volatile health care industry and any significant reduction in the annual distribution amount from the duPont Trust. Patient care revenues, which were 72% of fiscal 2003 revenues, represent a significant funding source for Nemours. Like other health care providers in the U.S., Nemours has had to adjust budgets to reflect changes due to third-party payors and rising expenses. Nemours' ability to adjust to these changes is reflected in its operating performance. Over the past five years, the only year with a negative operating margin was fiscal 2000 when the margin was a negative 3.4%. In large part, the deficit was due to increased malpractice expense. Fitch assumes that management will continue to make adjustments, when necessary, to maintain its financial strength. The second largest funding source is the annual distribution from the duPont Trust. Currently, 3% of the duPont Trust's value is distributed annually, and there are no plans to reduce this percentage.

Nemours provides health services to children in Delaware and surrounding states and in Florida. It also provides funding for selected health services for the needy elderly in Delaware. Nemours owns and operates the Alfred I. duPont Hospital for Children in Wilmington, Delaware, as well as four major children's specialty clinics in Wilmington, Delaware and in Jacksonville, Orlando and Pensacola, Florida.