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Fitch Affirms Memorial Sloan-Kettering Cancer Center's (New York) Bonds at 'AA'; Outlook Stable

Posted on: Friday, 14 March 2008, 18:02 CDT

Fitch Ratings has affirmed the 'AA' on the approximately $1.2 billion Dormitory Authority of the State of New York Memorial Sloan-Kettering Cancer Center (MSKCC) revenue bonds, series 1998, 2002, 2003, and 2006. The Rating Outlook is Stable. MSKCC expects to convert its $450 million in auction-rate securities to fixed-rate long-term debt.

The affirmation of the 'AA' rating and the Stable Outlook are supported by MSKCC's excellent liquidity position, strong fundraising ability, superior clinical reputation, effective management team, and increasing volume trends. At fiscal year-end Dec. 31, 2007 MSKCC had approximately $3.3 billion in unrestricted cash, which equaled 683 days cash on hand and compared favorably to the Fitch 'AA' category median of 237 days. Cushion ratio and cash to debt increased to 35.1 times (x) and 272.6% in fiscal 2007, up from 32x and 244.7% in fiscal 2006. This excellent liquidity position is supported by MSKCC's philanthropic program, which has strongly supported the organization's capital building program and overall mission. Philanthropic revenues were approximately $239 million in fiscal year (FY) 2007, and averaged $200 million over the past five years. Coverage of maximum annual debt service ([MADS] which excludes a $113 million principal amount due in 2036) was 5.4x for 2007, compared to the Fitch 'AA' category median of 5.6x.

As one of the world's leaders in providing cancer care, MSKCC has an excellent clinical reputation and is consistently ranked at or near the top of U.S. cancer hospitals, according to U.S. News and World Report. Furthermore, MSKCC garnered 14.4% of all cancer discharges in New York City in 2007, the highest market share of any hospital in the city for inpatient cancer services. Inpatient admissions for fiscal 2007 grew to 21,868 from 21,179 in 2006 and outpatient visits grew by 5% increasing to 443,831 in 2007 from 431,160 in 2006.

Credit concerns are minimal, but include MSKCC's ambitious $1.8 billion five-year capital plan, which calls for continued development of ambulatory care facilities in the surrounding suburbs in addition to main campus improvements. Funding for the program is expected come from operating cash flow, philanthropy and $200 million in bonds tentatively scheduled for 2009 or 2010. MADS as a percent of net revenues at 4.7% is moderately elevated for the rating category, but is offset by the very strong liquidity position.

MSKCC includes a 514-licensed-bed specialty hospital located on the Upper East Side of Manhattan, an institute for cancer research, a graduate school, and other affiliates following the mission of the prevention, treatment and cure of cancer. MSKCC had total operating revenues of almost $2 billion in fiscal 2007. MSKCC covenants to provide both annual and quarterly disclosure including balance sheet, income statement, cash flows, utilization statistics, and management discussion and analysis to bondholders and Fitch. Fitch views this positively and notes that disclosure to date has been thorough and timely.

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

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