Fitch Rts Community Medical Ctrs -- CA -- $135.6MM Bonds `BBB+'.

Business Editors

NEW YORK--(BUSINESS WIRE)--Aug. 14, 2000

Fitch has assigned a rating of `BBB+' to Central California Joint Powers Health Financing Authority's $135.6 million certificates of participation (Community Hospitals of Central California Project), series 2000 and has affirmed its `BBB+' rating on the authority's approximate $87 million of outstanding certificates, also issued on behalf of Community Hospitals of Central California d/b/a Community Medical Centers (CMC). Proceeds of the 2000 issue, along with other funds, will be used to finance a portion of CMC's five-year capital expansion program, fund a debt service reserve fund, and pay costs of issuance. The major project of the five-year program is the construction and equipping of the Community Regional Medical Center (CRMC) a state-of-the art hospital that, when completed, will consolidate services for both the Community Medical Center - Fresno (CMCF) and the University Medical Center (UMC). Other parts of the capital program include the expansion of Community Medical Center - Clovis, expansion of cancer services in the area, enhancement of management information systems, and other miscellaneous items. The bonds are expected to sell the week of Aug. 28, 2000 through negotiation by Salomon Smith Barney.

The `BBB+' rating is supported by CMC's strong market position, solid across-the-board financial indicators, the benefits of the to-be-constructed facility, the favorable physician relationships that CMC has formed, and CMC's proven management team. CMC maintains a total market share of approximately 46%, with the second player a distant 29%. CMC has been able to post solid financial results due to this market position, as well as other actions taken by its action-oriented and proven management team. Examples include forming favorable physician relationships without significant operating losses and successfully integrating and profitably operating UMC. For the ten months ended June 30, 2000, CMC had an operating margin of 4.1%, an excess margin of 7.0%, and coverage of pro forma maximum annual debt service (MADS) of 3.1 times (x). In addition, its days cash on hand was 150.7 at June 30, 2000.

The main credit concerns include the risks associated with the to-be-constructed facility, CMC's relatively large pro forma debt burden, its difficult payor mix, and mixed service area traits. Over the next five years, CMC will have the significant challenge of continuing to successfully operate both CMCF and UMC, construct the new CRMC, and then transition the great majority of its total system-wide activities to the new campus. Also, CMC will continue to face two inherent weaknesses of its location - its payor mix and service area traits. Operating in a largely agricultural region of central California, CMC serves a population with a relatively high unemployment rate and relatively low income levels. In addition, its payor mix contains larger than average amounts of both Medi-Cal and managed care. Finally, after the series 2000 issue, CMC will have pro forma cash to debt of 68.6% and debt to EBITDA of 4.1x.

Fitch believes that CMC will be successful with its new facility as it has been in the past with other projects. The new state-of-the-art hospital should allow CMC to improve upon its already solid financial indicators and build liquidity at the same time. Fitch also believes that CMC's market share will gradually increase at the expense of each of the other hospitals in the market.

Headquartered in Fresno, California, CMC operates a full-service health care system with three hospitals (724 staffed beds), three long-term care facilities, and other related entities.

Fitch is an international rating agency that provides global capital market investors with the highest quality ratings and research. Dual headquartered in New York and London with a major office in Chicago, Fitch rates entities in 75 countries and has some 1,100 employees in more than 40 local offices worldwide. The agency, which is a combination of Fitch IBCA and Duff & Phelps Credit Rating Co., provides ratings for Financial Institutions, Insurance, Corporates, Structured Finance, Sovereigns and Public Finance Markets worldwide.