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Fitch Rates Indiana Finance Authority 2008A & B Sisters of St. Francis Revs 'AAA/F1+'
NEW YORK-(Business Wire)-May 6, 2008 - Fitch Ratings has assigned an 'AAA/F1+' rating to the Indiana Finance Authority's health system revenue refunding bonds, series 2008 (Sisters of St. Francis Health Services, Inc. Obligated Group) consisting of the following:
—$81,660,000 series 2008A;
—$81,300,000 series 2008B
The rating is based on the rating of a direct-pay letter of credit (LOC) supporting the Bonds and the application of Fitch's joint probability methodology. The long-term 'AAA' rating on the Bonds is based jointly on the underlying rating assigned to the Sisters of St. Francis Health Services, Inc. (rated 'AA' by Fitch), and the support provided by an irrevocable direct-pay LOC issued by JPMorgan Chase Bank, N.A. (rated 'AA-/F1+') securing the bonds. The short-term 'F1+' rating is based solely on the LOC. For more information on the underlying credit please refer to the March 14 press release ('Fitch Affirms Sisters of St. Francis Health Services, Inc. (Indiana) at 'AA'') available on the Fitch Ratings web site at www.fitchratings.com.
The long-term 'AAA' 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 degree of correlation; Fitch has determined a low degree of correlation which results in a rating of 'AAA'. If either the Sisters of St. Francis Health Services, Inc. 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 high 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 LOC provides full coverage of principal plus an amount equal to 40 days' interest at a maximum rate of 12% based on a year of 365 days and purchase price for tendered bonds. The ratings will expire upon the earliest of: (a) May 15, 2013, the initial stated expiration dates of the LOC, unless such date is extended; (b) upon any prior termination of the LOC; or (c) upon defeasance of the Bonds. The underwriter for the series 2008A Bonds is Merrill Lynch, Pierce, Fenner & Smith Incorporated and the underwriter for the series 2008B Bonds is Citigroup Global Markets Inc. The Bonds are expected to be delivered on or about May 12, 2008.
The Bonds initially bear interest at a weekly rate mode, but may be converted to a daily, long term, short term (made up of individual bond interest terms) or ARS rate mode. While the bonds bear interest in the weekly rate mode, interest payments will be made on the first business day of each month, commencing June 4, 2008. Holders may tender their bonds on any business day, provided the tender agent, trustee and remarketing agent is given at least seven calendar days' prior notice of the purchase.
The Bonds are subject to mandatory tender: (1) on a conversion date; (2) on the fifth business day preceding any expiration or termination of a Credit or Liquidity Facility without replacement by an alternate Credit or Liquidity Facility or upon termination of the Liquidity Facility as a result of a Mandatory Standby Tender; (3) on the date of replacement of the Credit or Liquidity Facility; (4) on any business day designated by Sisters of St. Francis Health Services Inc. and (5) on fourth day after the Trustee's receipt from the Credit Facility Provider that an Event of Default has occurred and is continuing and written request requiring all Bonds be tendered for purchase. Optional and mandatory redemptions provisions also apply to the bonds.
Bond proceeds will be used to (i) pay off a portion of a loan that was used to redeem a portion of the Indiana Health and Educational Facility Financing Authority's health system revenue refunding bonds, series 2006D and series 2006F (Sisters of St. Francis Health Services Inc Obligated Group) and (ii) pay certain costs of issuance.
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.
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