Fitch Rates CoxHealth's (Missouri) $35MM 2008C Health Facilities Revs 'AA+/F1+'

October 7, 2008 4:07 PM EDT

NEW YORK--(BUSINESS WIRE)--

Fitch Ratings has assigned 'AA+/F1+' ratings to the Health and Educational Facilities Authority of the State of Missouri's $35 million variable-rate demand health facilities revenue bonds (CoxHealth), series 2008C (the Bonds). The ratings are based on the direct-pay letter of credit (LOC) supporting the bonds and the application of Fitch's joint probability methodology. The long-term rating assigned to the Bonds is based jointly on the underlying rating assigned to the bonds (currently rated 'A' by Fitch), and the support provided by the LOC issued by the Bank of America, N.A. (rated 'AA-/F1+' by Fitch) securing the bonds. The short-term 'F1+' rating is based solely on the LOC. For more information on the underlying credit rating, please refer to Fitch's Sept. 2 report on CoxHealth, available at www.fitchratings.com.

The long-term 'AA+' rating is based on Fitch's methodology which considers the joint probability of the failure of both a rated obligor and a bank LOC provider. The methodology results in a rating that is up to two notches higher than the stronger of the two credits if the following conditions are met: (1) both entities have a rating of 'A' or higher; (2) the transaction is structured such that payments from both the municipal issuer and the bank are in the flow of funds and both entities would have to fail to perform before the bonds defaulted; and (3) the credit of the bank and the rated obligor have no more than a medium correlation. In this instance, Fitch has determined that there is a low degree of correlation between the Bank and the underlying rating assigned to the Bonds, which results in a rating of 'AA+'. If either the Bonds or the Bank were downgraded to 'A-' or lower, the joint probability could no longer be applied and the long-term rating would then reflect the higher of the two ratings.

The Bank is obligated to make payments of principal of and interest on the Bonds upon maturity and redemption, as well as the purchase price for tendered bonds. The ratings assigned to the Bonds will expire upon the earliest to occur of (i) Oct. 15, 2011, the stated expiration of the LOC, unless such date is extended; (ii) any prior termination of the LOC; or (iii) the defeasance of the Bonds.

The Bonds initially bear interest at weekly rate, but may be converted to a daily rate mode. While the bonds bear interest in the daily or weekly rate mode, interest payments will be the first business day of each month, commencing Nov. 1, 2008. The bonds are subject to mandatory tender on: (i) the first day of each interest rate period; (ii) the second business day preceding the expiration of the LOC; (iii) the date on which a substitute LOC becomes effective; and (iv) the tenth day following the trustee's receipt of a written notice from the LOC provider stating that either (a) there has been an event of default under the reimbursement agreement or (b) the interest component of the LOC will not be reinstated; and directing a mandatory tender of the Bonds. Optional and mandatory redemption provisions also apply to the Bonds.

The underwriter for the bonds is Merrill Lynch, Pierce, Fenner & Smith Incorporated. Bond proceeds will be used to pay or reimburse a portion of the cost of certain capital expenditures made by CoxHealth, pay a portion of the interest on the Bonds, and to pay the costs of issuing the Bonds.

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.

Source: Fitch Ratings

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