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Fitch Rates Tampa General Hospital (Florida) $185MM Series 2006 Bonds 'A-'; Outlook to Stable

Posted on: Wednesday, 16 August 2006, 18:00 CDT

Fitch has assigned an 'A-' rating to approximately $185 million of Hillsborough County Industrial Development Authority, Florida Hospital Revenue Bonds (Tampa General Hospital Project), Series 2006. In addition, Fitch has affirmed the approximately $203 million of outstanding bonds listed at the end of the press release. The Rating Outlook has been revised to Stable from Positive due to the size of the series 2006 bond issuance.

Proceeds of the series 2006 bonds will be used to fund Tampa General Hospital's (TGH) build out and equipping of shelled space at the hospital, renovation of existing facilities, construction of additional parking space, and other miscellaneous capital needs. The series 2006 bonds are expected to sell the week of September 11th through negotiation led by Raymond James and Associates and Citigroup.

The Rating Outlook is revised to Stable from Positive due to the size of the series 2006 bond issuance. Nonetheless, Fitch expects TGH to continue to produce profitable operations given the hospital's strong market presence and management's ability to manage costs. In addition, the current capital projects should enhance revenue and patient volume growth, allowing TGH to grow into its current debt burden.

The 'A-' rating reflects TGH's strong operating performance, positive utilization trends, essentiality of services as the safety net teaching hospital of the Tampa region, and sound management practices. Profitability continues to be very strong with operating margins ranging 4.0%-4.9% from fiscal 2003-2005 and was 6.9% through the nine months ended June 30, 2006. Cash flow generation has also been solid with cash flow margins of 11.2% and 10.0% in fiscal 2004 and 2005, respectively. Utilization trends have been exceptional and have contributed to TGH's solid operating performance. From fiscal years 2001-2005, acute discharges, outpatient surgeries, and emergency room visits have grown by 25%, 62%, and 17%, respectively. As a regional referral center and the primary teaching hospital for the University of South Florida, TGH offers a broad and unique scope of services in a region that has an expanding population base. Management practices are sound given their ability to execute a sustainable operational and financial turnaround since fiscal 2000.

Primary credit concerns include a high indigent case load and Medicaid payor mix, competitive marketplace, and high debt burden in conjunction with the series 2006 bond issuance. As a safety net hospital, TGH provides care to many of Tampa's most impoverished residents. Medicaid and the indigent county health plan, HCHCP, made up a combined 21.4% of gross revenues in fiscal 2005. Despite TGH's status as the service area's only teaching hospital, the marketplace remains competitive with BayCare Health System (revenue bonds rated 'AA-' by Fitch) and several for-profit health systems located in Hillsborough County. TGH had a second leading market share of 20.8% in the PSA behind BayCare's 33.6%. Factoring in the series 2006 bond issuance, TGH's debt burden will be high as exhibited by a pro-forma MADS of 4.2% of revenues and pro-forma debt to capitalization of 67.6% for fiscal 2005. As result, MADS coverage is light for the rating category at 2.2 times (x) in fiscal 2005 and 2.9x through the nine months ended June 30, 2006. In addition, TGH's balance sheet will be leveraged as pro-forma cash to debt declines to 56% from 107% at Dec. 31, 2005. However, days cash on hand is moderate at 140 days.

Located in Tampa, Florida, TGH is an acute-care teaching hospital with 877 licensed beds. Total operating revenue in fiscal 2005 was $666 million. The hospital is one of seven designated level I trauma hospitals in the State of Florida. In addition to providing annual financial statements, the hospital's upcoming continuing disclosure agreement will covenant to provide quarterly disclosure to bondholders. However, TGH voluntarily provides quarterly disclosure to the national repositories, which includes a balance sheet, income statement, and cash flow statement, and utilization statistics.

Outstanding bonds affirmed at 'A-':

-- $203,600,000 Hillsborough County Industrial Development Authority hospital refunding revenue bonds (Tampa General Hospital Project), series 2003

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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