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SISTERS OF MERCY HEALTH CORP SERIES O (IA) & SERIES P (MICH.) BONDS RATED 'A' BY FITCH -- FITCH FINANCIAL WIRE --

 NEW YORK, Oct. 27 /PRNewswire/ -- The $37.5 million City of Sioux City, Iowa 1993 series O and $161.3 million Michigan State Hospital Finance Authority 1993 series P hospital revenue refunding bonds (Sisters of Mercy Health Corporation Obligated Group) are rated 'A' by Fitch. The credit trend is stable. Bond proceeds will be used to refund several outstanding bond issues of the Sisters of Mercy Health Corporation Obligated Group. The bonds are expected to be priced through negotiation by Goldman, Sachs & Co. during the week of Nov. 1.
 The rating is supported by the benefits that Sisters of Mercy Health Corporation (SMHC) derives from being part of a diversified health care system. Although the bulk of SMHC's revenues are derived from hospital operations, a significant and growing portion comes from SMHC's home care and its own managed care enterprises. SMHC management has taken the lead in entering into collaborative arrangements with other health care providers in certain SMHC markets to better coordinate the provision of services in the community, mitigate competitive threats, and improve profitability. Since 1991, the obligated group's financial operating performance has steadily improved, with operating margins increasing from 1.5 percent to 2.8 percent. Liquidity also is good, with cash on hand at 82 days. Pro forma maximum annual debt service coverage of approximately 2.7 times in fiscal 1993 is sound.
 Improvement has been made in reducing losses at SMHC's Detroit facility, but losses remain significant ($7.1 million in fiscal 1993) and this continues to be a challenge. Another concern is the current debt structure, which includes $24.7 million in short-term debt outstanding and guarantees of $83.1 million, associated with non- obligated affiliates and other entities. In addition, SMHC facilities generally operate in competitive markets and are further challenged by an increasing managed care market and declining commercial payor base.
 SMHC is a subsidiary of Mercy Health Services, a diversified health care corporation with operations largely in Michigan and Iowa. The obligated group consists of 24 hospitals and other inpatient facilities, which accounted for 78 percent and 84 percent of SMHC's consolidated fiscal 1993 net operating revenues and total assets, respectively. In addition to traditional acute care services, the obligated entities operate a broad range of long-term care, primary care, and specialty outpatient care services.
 -0- 10/27/93
 /CONTACT: Michele Cebron, 212-908-0591, Jeff Schaub, 212-908-0680, or Fred Martucci, 212-908-0554, all of Fitch/


CO: Sisters of Mercy Health Corp. ST: Michigan, Iowa IN: MTC SU: RTG

WB -- NY042 -- 7202 10/27/93 10:52 EDT
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Publication:PR Newswire
Date:Oct 27, 1993
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