Fitch Upgrades Valley View Hospital (Oklahoma) to 'BBB+'; Removes From Rating Watch Negative.
The two-notch rating upgrade and the Stable Outlook is based solely on the strength in VVRH's sales tax debt service subsidy, not on VVRH's hospital operations. VVRH receives a debt service subsidy from the City of Ada, Oklahoma, based on 1% of sales taxes collected. The subsidy received has increased for 10 of the last 11 fiscal years (to $2.89 million in 2005 from $2.03 million in 1995) and has exceeded VVRH's maximum annual debt service (MADS) on the series 1996 bonds for the last five fiscal years. The tax subsidy cannot be repealed and will expire only with the final maturity of the series 1996 bonds in 2014. More pronounced than at the time of issuance, VVRH's sales tax debt service subsidy now provides a significant financial cushion as operating revenue-only debt service coverage indicators are low. Until 2001, the sales tax debt service subsidy was insufficient to cover debt service on the series 1996 bonds. As a result, hospital operations were required meet the annual debt service requirement. Fitch believes Ada's sales tax revenues should continue to increase as big box retailers, such as Home Depot, started moving into the City in 2005.
Primary credit concerns include the possibility of impairment to Ada's revenue stream from sales taxes due to an economic slowdown and VVRH's very weak disclosure practices. Despite below-average economic indicators, Ada's tax base has consistently expanded. VVRH covenants to disclose only annual financial information and utilization statistics to the Nationally Recognized Municipal Securities Information Repositories (NRMSIRs), which Fitch views negatively. To date, VVRH has only provided annual statements for fiscal years 1994, 1995, and 2004 to the NRMSIRs.
Located in Ada, OK, Valley View is a community hospital with 167 licensed beds, including a 20-bed rehabilitation unit, which recently closed its 15-bed skilled nursing facility. Valley View's total operating revenue in fiscal 2005 was approximately $66.118 million.
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|Date:||Aug 14, 2006|
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