Fitch Rtes $202MM Rush Univ Med Center Obligated Group (IL) Sers 2006 Bonds 'A-'; Outlook Stable.

CHICAGO -- Fitch Ratings has assigned an underlying 'A-' rating to the upcoming $202 million Illinois Finance Authority Revenue Refunding Bonds (Rush University Medical Center Obligated Group; or, the Obligated Group) series 2006A & B. The series 2006A bonds are expected to be issued as variable-rate demand bonds while the series B bonds are expected to be issued as auction rate securities (ARS). All the series 2006 bonds are expected to be insured by MBIA, whose insurer financial strength is rated 'AAA' by Fitch. In addition, Fitch expects to assign a short-term rating closer to the closing date to the series 2006A bonds based upon liquidity support to be provided by JP Morgan Chase, NA. Fitch has also assigned an underlying 'A-' rating to the outstanding bonds listed at the end of this release. The Rating Outlook is Stable.

The series 2006 bonds are expected to sell the week of August 14 through negotiation led by Morgan Stanley and Citigroup. Bond proceeds will be used to refund all of the Obligated Group's series 1993, series 1996A, and series 1998B bonds currently outstanding, fund a debt service reserve fund, pay the bond insurance premium and the associated costs of issuance. Upon closing Rush University Medical Center Obligated Group will have approximately $335 million of bonds outstanding.

The 'A-' rating on the Obligated Group reflects the strong support of the medical staff at the obligated group's flagship facility, Rush University Medical Center (RUMC), the regional draw of patients due to RUMC's reputation and clinical excellence, the improved balance sheet and financial results in 2005 and 2006, and the strong fundraising and philanthropic support received throughout the Chicago land area. RUMC (located on the near west side of Chicago) is unique among health care providers in that the medical school, the research operations, the employed medical staff, and the hospital operate as a single business entity. Fitch believes that current management has been able to achieve successful integration of these areas that has resulted in a very stimulating operating environment for the physician staff. In turn, the organization benefits from the strong support and allegiance of the medical staff, 80% of which admit solely to RUMC. Moreover, the combination of education, research and clinical applications has been a key driver in building RUMC's reputation for clinical excellence. Thus, RUMC is a regional medical center that draws patients from the eight-county greater Chicago land area and beyond. Over 90% of RUMC's 2005 admissions originated from this eight-county area which encompasses a population in excess of 8.5 million people. While several of the Obligated Group's current balance sheet and operating measures are weaker than Fitch's 'A' medians, financial performance has shown dramatic improvement over the last four years. As of March 31, 2006 the Obligated Group's unrestricted cash and investments of $364 million has grown 210% from 2002. Fitch believes the solid operating and excess margins generated in 2005 and in the year-to-date period are sustainable going forward. Finally, RUMC has historically enjoyed generous community financial support. As of June 30, 2005 RUMC's total endowment fund totaled $355 million. The board publicly announced a capital campaign goal of $300 million to help fund a facility expansion. Through May, $154 million in gifts and pledges have been raised.

Credit concerns include RUMC's history of negative operating results, a dated physical plant, and a sizable capital budget that includes a replacement hospital tower. Prior to fiscal 2005, RUMC has posted negative operating margins in each year since 2000. RUMC's operating results have progressively improved over the last five years with the exception of fiscal 2004, which was attributable in large part to a spike in medical malpractice expense. The physical plant at RUMC consists of several buildings that are over 100 years old. The various renovations and expansions have created an inefficient physical plant that is incompatible with today's technology and patient care demands. Historical capital spending has been very light with capital expenditures as percentage of depreciation expense averaging just 93.8% per year since 2001. Management has purposefully limited capital spending during the financial turnaround and the development of a campus redevelopment plan. RUMC's eight-year facility renovation plan totals approximately $760 million of which $250 million is expected to be funded through additional debt and the balance generated from operations, government funding and philanthropy. The preliminary plans envision a replacement bed tower with 350 beds and a major reconfiguration of the Chicago campus.

The Stable Outlook reflects RUMC's status as one of the premier academic medical centers in the Chicago land area and the clinical excellence of its medical staff. The Outlook also reflects Fitch's belief that the positive operating performance achieved in fiscal 2005 and through the nine-month interim period will be sustained going forward. Fitch believes plans for additional debt to be moderate with expected issuance in 2008 and 2010 assuming recent financial performance is maintained.

In connection with the series 2006 bonds, the Obligated Group has entered into two floating- to fixed-rate swaps effective June 14, 2006 with Morgan Stanley Capital Services Inc. and Citibank, N.A. for notional amounts that match each of the series 2006 bonds. The swaps amortize with the series 2006 bonds. The swap payments will be insured by MBIA.

The Obligated Group consists of four acute care hospitals, a medical university, research facilities, a physician group practice consisting of 319 employed physicians, and a rehabilitation/skilled nursing facility. The four acute care hospitals have a total of 1,222 staffed beds and are located in Chicago, Oak Park, Skokie, and Aurora, IL. In fiscal 2005, the Obligated Group reported total revenues of $1.4 billion. The Obligated Group's disclosure practices are excellent with quarterly and annual disclosure consisting of balance sheet, income statements and cash flow statements, utilization statistics and a management discussion and analysis.

Fitch rates the following 'A-':

--$50,600,000 Illinois Finance Authority Variable Rate Demand Revenue Bonds, Series 2006A-1 (Rush University Medical Center Obligated Group) -- Underlying rating. Bonds are insured by MBIA, whose insurer financial strength is rated 'AAA' by Fitch with liquidity support to be provided by J.P. Morgan Chase Bank, NA.

--$50,600,000 Illinois Finance Authority Variable Rate Demand Revenue Bonds, Series 2006A-2 (Rush University Medical Center Obligated Group) -- Underlying rating. Bonds are insured by MBIA, whose insurer financial strength is rated 'AAA' by Fitch with liquidity support to be provided by J.P. Morgan Chase Bank, NA.

--$50,600,000 Illinois Finance Authority Revenue Bonds, Series 2006B-1 (Rush University Medical Center Obligated Group) (ARS) -- Underlying rating. Bonds are insured by MBIA, whose insurer financial strength is rated 'AAA' by Fitch.

--$50,600,000 Illinois Finance Authority Revenue Bonds, Series 2006B-2 (Rush University Medical Center Obligated Group) (ARS) -- Underlying rating. Bonds are insured by MBIA, whose insurer financial strength is rated 'AAA' by Fitch with liquidity support to be provided by J.P. Morgan Chase Bank, NA.

Outstanding debt rated 'A-':

--$90,825,000 Illinois Health Facilities Authority Revenue Bonds, series 1998A (Rush-Presbyterian St. Lukes) -- Underlying rating. Bonds are insured by MBIA, whose insurer financial strength is rated 'AAA' by Fitch;

--$44,700,000 Illinois Health Facilities Authority variable rate demand revenue bonds, series 1998B (Rush Presbyterian St. Lukes) -- Underlying rating. Bonds are insured by MBIA, whose insurer financial strength is rated 'AAA' by Fitch with liquidity support provided by J.P. Morgan Chase Bank, NA.;

--$34,000,000 Illinois Health Facilities Authority revenue bonds, series 1996A (Rush-Presbyterian St. Lukes) -- Underlying rating. Bonds are insured by MBIA, whose insurer financial strength is rated 'AAA' by Fitch;

--$1,165,000 Illinois Health Facilities Authority variable-rate demand revenue bonds, series 1996B (Rush Presbyterian St. Lukes) -- Underlying rating. Support provided by a letter-of-credit issued from The Northern Trust Company;

--$105,585,000 Illinois Health Facilities Authority revenue bonds, series 1993 (Rush-Presbyterian St. Lukes) -- Underlying rating. Bonds are insured by MBIA, whose insurer financial strength is rated 'AAA' by Fitch;

--$21,500,000 Illinois Health Facilities Authority variable-rate demand revenue bonds, series 1989A (Rush Presbyterian St. Lukes) -- Underlying rating. Support provided by a letter-of-credit issued from The Northern Trust Company;

Not rated by Fitch:

--$11,094,000 Illinois Health Facilities Authority variable-rate demand revenue bonds, series 1985C, D and F (Rush Presbyterian St. Lukes) -- Supported by letters-of-credit issued from J.P. Morgan Chase Bank. N.A.;

--$8,320,000 Illinois Health Facilities Authority variable-rate demand revenue bonds, series 1983.

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.