Fitch Rates OhioHealth (OH) Bonds 'AA-'; Affirms Outstanding Debt.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 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. has assigned an underlying 'AA-' rating to approximately $167.2 million of variable-rate demand hospital facilities revenue bonds, series 2006, for the County of Franklin, Ohio Franklin is a city in Warren County, Ohio, United States. The population was 11,396 at the 2000 census. History Franklin was founded by General William C. Schenck, in 1796. The settlement was named for Benjamin Franklin. (OhioHealth Corporation). Fitch has also affirmed the 'AA-' rating on the outstanding $686 million of revenue bonds listed below, some of which are underlying. The Rating Outlook is Stable. The bonds are expected to be insured by Ambac Assurance Corp., whose insurer financial strength is rated 'AAA' by Fitch. In addition, the bonds will be backed by a standby bond purchase agreement provided by Landesbank Hessen-Thuringen Girozentrale (Helaba). Fitch expects to assign the long-term and short-term ratings nearer to the closing of the bonds. Bond proceeds will be used to refund Grady Memorial Hospital's series 1993 bonds ($13 million), fund various capital expenditures ($150 million), and pay costs of issuance including bond insurance. OhioHealth has entered into a forward starting floating-to-fixed rate swap related to the series 2006 bonds totaling $50 million. In addition, OhioHealth has an outstanding swap (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 $134.6 million) related to the series 2003 bonds. The counterparty for both swaps is Citibank, N.A. Including the swaps, OhioHealth expects to have approximately 50% fixed-rate and 50% variable-rate debt totaling approximately $663 million after the issuance of the series 2006 bonds and the defeasance of the debt allocable to Southern Ohio Medical Center (see below). The 'AA-' rating affirmation is supported by OhioHealth's very strong and consistent profitability since fiscal 2003, manageable 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 debt burden, and increasing, solid liquidity position. From fiscal 2003-2005 (June year-end), OhioHealth posted very strong operating margins ranging from 5.5%-6.0%. Through six months of fiscal 2006, OhioHealth's profitability remained strong with a 4% margin ($37.3 million operating gain). OhioHealth's operating performance continues to be supported by positive utilization trends, improved managed care reimbursement, and various costs controls including labor expense. Recent systemwide operations reflect a marked improvement from operating losses in fiscal 2000 and 2001 following the acquisition and restructuring of the Doctors Hospital facilities. However, Fitch views recent operating losses at these facilities as a concern. In fiscal 2005, pro forma maximum annual debt service (MADS) coverage from 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 was very strong at 6.9 times (x), well above Fitch's 'AA' median of 4.8x. Moreover, MADS as a percentage of revenue and debt to EBITDA in fiscal 2005 were low, both of which equaled 2.2%. As of Dec. 31, 2005, OhioHealth's $880.6 million of unrestricted cash equaled 201 days cash on hand and 129% pro forma cash to debt. OhioHealth's liquidity growth has been aided by its continued low days in accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying , which were at 45.4 days as of Dec. 31, 2006. The rating incorporates the expectation that Southern Ohio Medical Center (SOMC SOMC Southern Ohio Medical Center SOMC Service Oriented Mass Customization SOMC Start-Of-Message Character ) will exit the 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 effective July 1, 2006. Grady Memorial Hospital Grady Memorial Hospital, frequently referred to as Grady Hospital or simply Grady, is the largest hospital in the state of Georgia, and is the public hospital for the city of Atlanta. will become a member of the obligated group concurrent with the issuance of the series 2006 bonds. Grady's outstanding debt of $13.3 million will be refunded with a portion of the series 2006 bonds. SOMC accounts for $33 million of outstanding debt, which is expected to be cash defeased or refunded by SOMC. The departure does not have a material impact on OhioHealth's overall financial profile. Primary credit concerns include the highly competitive market, high exposure to Medicaid reimbursement, and future capital plans. Although OhioHealth's three largest hospitals maintain a leading 44% market share position in Franklin County Franklin County is the name of 24 counties in the United States. All except Franklin County, Idaho are likely named for Benjamin Franklin, a Founding Father of the United States. , it is closely followed by Mount Carmel Health System (part of Trinity Health Trinity Health is an American healthcare provider headquartered in Minot, North Dakota. Trinity is a non-profit organization. Trinity has a 150+ physician medical group. ; revenue bonds rated 'AA-' by Fitch) at 31% and Ohio State University Ohio State University, main campus at Columbus; land-grant and state supported; coeducational; chartered 1870, opened 1873 as Ohio Agricultural and Mechanical College, renamed 1878. There are also campuses at Lima, Mansfield, Marion, and Newark. Hospitals at 25%. In addition, competition has proliferated in the Columbus market, including a physician-owned specialty hospital and outpatient surgery Outpatient Surgery, also referred to as ambulatory surgery or same-day surgery, is surgery that does not require an overnight hospital stay. The term “outpatient” arises from the fact that surgery patients may go home do not need an overnight hospital centers. In fiscal 2005, 12% of gross revenues were derived from Medicaid, resulting in significant exposure to changes in government reimbursement. In fiscal 2006, OhioHealth expects a $13.5 million reduction in revenue, which reflects a recalibration of Medicaid inpatient diagnosis related groups, restructured workers compensation payments, and reduced disproportionate share payments. From fiscal 2006-2010, 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. is expected to accelerate and average 155% of annual depreciation expense, up from 122% during fiscal 2001-2005, which may limit additional liquidity growth. However, Fitch views OhioHealth's projected capital investment into growing suburban markets favorably. In particular, OhioHealth expects to open 94-bed Dublin Methodist Hospital in October 2007 at a cost of $130 million. The Stable Rating Outlook reflects Fitch's belief that OhioHealth's strong financial performance should be sustainable over the medium term due to strategic growth initiatives, particularly at its Grant and Riverside facilities. Fitch believes OhioHealth's strategic growth plans will strengthen its position in a competitive market. OhioHealth is a 14-hospital system (seven owned), based in Columbus, OH. OhioHealth had $1.7 billion in total revenue in fiscal 2005. OhioHealth covenants to provide bondholders an annual audit within 180 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. and quarterly disclosure within 60 days of quarter-end via the NRMSIRs. Quarterly disclosure includes a balance sheet, consolidated and consolidating income statement, statement of cash flows, utilization statistics, and a management and discussion analysis. Outstanding Debt: --$52,050,000 County of Franklin, Ohio variable auction-rate hospital facilities revenue bonds series 2003A (OhioHealth Corporation) (1); --$134,650,000 County of Franklin, Ohio variable auction-rate hospital facilities refunding revenue bonds series 2003B-1 and B-2 (OhioHealth Corporation) (1); --$122,620,000 County of Franklin, Ohio fixed-rate hospital facilities refunding revenue bonds, series 2003C-1 and C-2 (OhioHealth Corporation) (1)*; --$26,290,000 County of Franklin, Ohio variable-rate hospital facilities refunding revenue bonds, series 2003D (OhioHealth Corporation) (2); --$79,735,000 County of Franklin, Ohio variable-rate hospital revenue refunding and improvement bonds, series 1996A (OhioHealth Corporation) (2); --$27,305,000 County of Franklin, Ohio variable-rate hospital revenue refunding and improvement bonds, series 1996B (OhioHealth Corporation) (2); --$13,925,000 County of Franklin, Ohio variable-rate hospital revenue refunding and improvement bonds, series 1996C (OhioHealth Corporation) (2); --$11,350,000 County of Franklin, Ohio Hospital revenue facilities bonds, series 1993A (OhioHealth Corporation); --$5,620,000 County of Franklin, Ohio hospital facilities revenue bonds, senior series 1998A (Doctors OhioHealth Corporation) (3); --$40,490,000 County of Franklin, Ohio variable-rate demand hospital facilities revenue bonds, subordinate series 1998B (Doctors OhioHealth Corporation) (not rated). (1)Underlying rating. Bonds are insured by 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 Corporation, whose insurer financial strength is rated 'AAA' by Fitch. (2) Underlying rating. Bonds are supported by third party letter of credit. (3) Formerly under separate Doctors OhioHealth Group. OhioHealth has issued a master note, bringing series 1998A bonds on parity with all other outstanding debt. 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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