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Fitch Rates St. Jude Children's Research Hospital (Tennessee) Series 2006 Bonds 'AA+'

Posted on: Friday, 10 November 2006, 00:00 CST

Fitch Ratings has assigned an 'AA+' rating to The Health, Educational, and Housing Facility Board of the County of Shelby, Tennessee's $236.11 million series 2006 revenue bonds (St. Jude Children's Research Hospital).

The series 2006 bonds are expected to price the week of Nov. 30 through negotiation led by Bear, Stearns & Co. Inc. and Goldman, Sachs & Co. Fitch also affirms the 'AA+' rating assigned to the outstanding $116.5 million series 1999 hospital revenue bonds. The Rating Outlook remains Stable.

Proceeds from the series 2006 bonds will be used to advance refund $109,900,000 of the callable portion of series 1999 bonds; provide a new integrated patient care and research facility that will include 18 additional inpatient beds and 24 research laboratories for expanding research of childhood cancers; and pay capitalized interest and costs of issuance.

The 'AA+' rating and Stable Outlook reflect the absolute and unconditional guarantee on the debt service payments of the series 1999 bonds and planned series 2006 bonds by American Lebanese Syrian Associated Charities, Inc. (ALSAC), whose sole purpose is to raise funds for the maintenance and operation of St. Jude Children's Research Hospital, Inc. (St. Jude). ALSAC maintains a substantial level of unrestricted net assets, low operating costs, lack of existing debt and no plans for indebtedness, and an appropriate investment strategy for long-term investments. ALSAC's annual contributions and bequests increased significantly in fiscal 2006 to approximately $507 million from approximately $276 million in fiscal 2002.

For fiscal years 2004-2006, the sale of securities resulted annually in significant realized investment gains that exceeded $100 million. Unrestricted net assets for fiscal 2006 exceeded $1.1 billion, up from approximately $733 million in fiscal 2003. The combined St. Jude/ALSAC unrestricted liquidity position is approximately 500 days cash on hand (DCOH) and a cash-to-debt ratio of approximately 639% as of June 30, 2006, excluding the series 2006 bonds. Including the series 2006 bonds, DCOH and pro forma cash-to-debt ratio would equal approximately 543 days and 353%, respectively, as of June 30, 2006. St. Jude is one of the world's premier biomedical research centers and premier pediatric oncology treatment centers, which also strongly supports the rating and Outlook. St. Jude's research capabilities allow the hospital to remain at the forefront of disease management in pediatric oncology.

Fitch believes that, although St. Jude's annual operating performance is dependent on continued fundraising and investment income from ALSAC, ALSAC has a substantial level of reserves, a history of strong community and corporate support that appears relatively immune to economic cycles, a strong brand identity and brand recognition, and involvement on its boards from professionals with substantial levels of experience in fund raising and investment management. All non-patient related sources of revenues including contributions, research grants, and investment income represented approximately 90% of total revenues for the combined St. Jude/ALSAC in 2004-2006.

St. Jude is a 62-licensed bed pediatric specialty hospital (with associated outpatient clinics and other facilities). St. Jude is located in Memphis, Tennessee and is the only stand alone pediatric oncology center in the nation. Although St. Jude has not historically submitted audited annual financial statements or unaudited quarterly financial statements to the Nationally Recognized Municipal Securities Information Repositories, the hospital fully intends to begin the practice of doing such with the issuance of the series 2006 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: Business Wire

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