Sisters of St. Francis Health Services' series 2009A revenue bonds rated 'AA' by Fitch

Fitch Ratings has assigned a 'AA' rating to the expected issuance of approximately $225 million of Indiana Finance Authority Health System revenue bonds, series 2009A (Sisters of St. Francis Health Services, Inc. Obligated Group; (SSFHS). In addition, Fitch affirms the outstanding 'AA' long-term ratings on approximately $950.3 million of bonds issued for SSFHS.

The Rating Outlook is Stable.

The series 2009A bonds are expected to be issued as traditional fixed-rate debt. Bond proceeds will reimburse the corporation $121.4 million for prior capital expenditures, provide funding for future capital needs primarily at its Indianapolis and Lafayette, IN, campuses and pay associated costs of issuance. The series 2009A bonds are expected to be priced through negotiation during the week of Oct. 19 or Oct. 26.

The 'AA' rating continues to be supported by SSFHS's strong liquidity position, modest debt burden and solid debt service coverage, and strong market position in each of its four regions. At Aug. 31, 2009, SSFHS's unrestricted cash and investments totaled $1.27 billion, which translates into 243 days of cash on hand, a cushion ratio (based on pro forma maximum annual debt service [MADS]) of 20.3 times (x) and 134% of cash-to-long-term debt. Improved operating efficiency due to the consolidation of various system functions has allowed the SSFHS to maintain solid operating margins. Profitability measures have been strong with operating EBITDA margins of 9.9%, 11.1% and 12.0% in fiscal 2006, 2007 and 2008, respectively. SSFHS's strong cash flow generation combined with a modest debt burden has produced solid historical debt service coverage. Pro forma MADS increases to $63.7 million from $54.4 million but remains modest at 2.9% of 2008 total revenues, which is in line with Fitch's 2009 'AA' median of 2.8%.

Source: Sisters of St. Francis Health Services, Inc.