Fitch Ratings: MedStar Resolves IRS Audit.Business Editors NEW YORK--(BUSINESS WIRE)--June 20, 2002 MedStar Health MedStar Health is a $2.9 billion non-profit healthcare organization. It operates 25 businesses, including seven hospitals in the Baltimore-Washington region of the United States. Inc. (MedStar) has resolved the three-year long IRS An abbreviation for the Internal Revenue Service, a federal agency charged with the responsibility of administering and enforcing internal revenue laws. audit which put in question the tax exempt status of its $300 million outstanding District of Columbia District of Columbia, federal district (2000 pop. 572,059, a 5.7% decrease in population since the 1990 census), 69 sq mi (179 sq km), on the east bank of the Potomac River, coextensive with the city of Washington, D.C. (the capital of the United States). multimodal Two or more modes of operation. The term is used to refer to a myriad of functions and conditions in which two or more different methods, processes or forms of delivery are used. On the Web, it refers to asking for something one way and receiving the answer another; for example requesting revenue bonds Medlantic/Helix Issue 1998A, 1998B, and 1998C, and $283.5 million outstanding Maryland Health and Higher Education higher education Study beyond the level of secondary education. Institutions of higher education include not only colleges and universities but also professional schools in such fields as law, theology, medicine, business, music, and art. Facilities Authority Revenue Bonds Medlantic/Helix Issue Series 1998A and 1998B. MedStar has chosen to pay a penalty of $500,000 to the IRS which represents 30% of the alleged 'arbitrage profit' on the bonds. 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. views this resolution very favorably for the amount of the penalty owed by MedStar, because it brings closure to an issue that has been costly for MedStar, and because it removes uncertainty regarding the tax exempt status of the bonds. The $500,000 penalty has eliminated the risk of what could have been a sizeable penalty for MedStar, and is much lower than what Fitch expected. Management estimates that it could save 50 to 100 basis points in interest costs on the outstanding bonds or $1.5 million to $3 million annually now that the issue is resolved. Additionally, the escrow account, which currently holds $9.2 million in restricted funds will revert to MedStar's unrestricted cash. MedStar's outstanding debt is currently rated 'BBB' with a stable rating outlook. For additional information on MedStar and Fitch's most recent rating action please see the Fitch report dated May 29, 2002 at 'www.fitchratings.com'. |
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