• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

Fitch Rates Los Angeles (California) Orthopaedic Hospital Foundation Revs 'A-'

Posted on: Monday, 27 August 2007, 18:17 CDT

Fitch has assigned its 'A-' rating to the approximately $54 million California Statewide Communities Development Authority refunding revenue bonds (Los Angeles Orthopaedic Hospital Foundation [the foundation] and Orthopaedic Hospital [the hospital] [collectively, the organization]) series 2007. The Rating Outlook is Stable. The bonds will current refund all of the hospital's outstanding revenue bonds, series 2000. The bonds are expected to sell during the later half of September 2007, via negotiation with JPMorgan.

The 'A-' rating is based on the organization's strong balance sheet and improved operating performance. Unrestricted cash and investments, including board designated funds for research, increased to $170.6 million, equaling a cash-to-debt of 316%. A major asset sale (nine acres at the northern end of the Downtown Campus) buttressed its unrestricted cash position by $60.2 million and enhanced the foundation's investment portfolio. The foundation recently adopted new investment target allocations; 60% equity investments, 25% fixed income investments, and a target of 15% for alternative investments. The foundation currently holds approximately 67% of its investments in equities, 25% in fixed income securities, and 7.0% in alternative investments. Fitch believes the foundation's new asset allocation is appropriate and reflects astute management policies and practices. The combined foundation and hospital balance sheet's net asset position remains strong as well, following the gain on the property sale. Unrestricted net assets increased by 65% to approximately $206.4million, and the ratio of debt to unrestricted fund balance declined to 26%.

The hospital's business operations remain in transition. Outpatient facilities are operated by the hospital on its downtown campus. Inpatient operations are now administered by the Santa Monica-University of California, Los Angeles (UCLA) Medical Center--the hospital's strategic affiliate since 1998. Construction of a new hospital will adjoin existing UCLA hospital facilities and is scheduled to open in fiscal 2009. The hospital owns 33% of the Santa Monica-UCLA Medical Center and the hospital facilities as a tenant in common. In addition, the hospital will occupy the Orthopaedic Hospital Research Center, owned entirely by the Regents of the University of California, and partially financed with proceeds from the series 2000 bonds. Following these changes, the hospital's healthcare operations will focus primarily on outpatient orthopedic pediatric services and urgent care services to adult and pediatric patients. The hospital continues to conduct research activity both independently and jointly with UCLA.

Through eight months ended June 30, 2007, the organization's operating loss amounts to a negative $5.6 million, surpassing the $5.3 million experienced in all of fiscal 2006. Management's financial projections reflect growth in outpatient volumes, reduced operating losses, and an 8% investment return, which Fitch views as achievable.

The hospital was started in 1911 as a clinic for crippled children. It is the most advanced treatment and teaching center in the western United States for children with disorders that strike bones, joints, muscles, nerves and connective issue. In June 1998, the hospital formed a strategic alliance with UCLA and the Board of Regents of the University of California. The alliance was formed to eliminate the financial risk to the hospital associated with operating an inpatient hospital facility, to improve the hospital's ability to manage revenues and expenditures, to enable the hospital to increase capacity, and to expand its research and education efforts.

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: Business Wire

More News in this Category