2008-11-21 01:15:06 -

This announcement corrects the version issued earlier today. The fourth paragraph contained an error which is corrected in the following version:
Fitch Ratings has assigned an 'F1+' short-term rating to North Mississippi Health Services (NMHS) based on self-liquidity related to the expected reoffering of approximately $66.8 million in Mississippi Hospital Equipment and Facilities Authority variable-rate revenue bonds (North

Mississippi Health Services), 2001 series 1, and 1997 series 1. The reoffering of the 2001 series 1 is expected to take place Dec. 1, 2008, and the reoffering of the 1997 series 1 is expected to take place on Dec. 10, 2008.
Simultaneously, Fitch affirms the 'F1+' short-term rating and 'AA' long-term rating on NMHS' outstanding debt. After the completion of this reoffering, all of NMHS' $141.6 million of debt will be in seven day variable rate demand bonds supported by self-liquidity. The Rating Outlook is Stable.
The 'F1+' rating reflects that NMHS has adequate cash and investments to pay the total bond amount of $141.6 million that could be tendered on a single day, plus accrued interest of approximately $350,000. At Oct. 31, 2008, NMHS had cash and short-term fixed income investments available within one business day of $228.9 million. Based on Fitch's rating criteria related to self liquidity (see Fitch's report 'Guidelines for Rating Variable Rate Demand Bonds and Commercial Paper Issued with Internal Liquidity' dated March 7, 2006) NMHS' eligible cash and investment position available for same day settlement would cover the cost of the maximum tender exposure on any given date by 1.58 times (x).
Fitch also views positively NMHS' procedures letter that is in place to handle an event of tender and that NMHS voluntarily provides monthly disclosure of its liquidity position and its holdings on DAC. In August 2008, NMHS successfully handled an event of tender on approximately $20.3 million in bonds. Upon notification by the trustee, NMHS followed its procedures letter and had the $20.3 million in funds available for wire within one business day. All but $10 million of the bonds were remarketed within the seven day remarketing period, and NMHS wired the $10 million to the trustee at the appropriate time to cover this amount. These remaining $10 million in bonds were eventually remarketed and the trustee returned the $10 million to NMHS.
The long-term rating affirmation reflects NMHS' strong liquidity, good debt service coverage, and leading market position. Unaudited results from year end fiscal year 2008 (ending Sept. 30, 2008) show that NMHS had 232.8 days cash on hand, a cushion ratio of 27x, and cash to debt of 262.9%, all of which compare favorably to Fitch's 'AA' 2008 category medians. NMHS' maximum annual debt service coverage of 4.8x also compares well to the category median. NMHS continues to benefit from its leading market share position, which in 2006 was 43.7% across its primary service area (PSA), including a nearly 93% market share in Lee County where its flagship hospital, North Mississippi Medical Center, is located. NMHS' nearest competitor, Baptist Health System, has only a 26% market share across the PSA.
Key rating drivers for NMHS include NMHS' ability to manage rising bad debt and charity care which has put pressure on operating margins over the past few years. From fiscal 2006 to fiscal 2007, NMHS' bad debt as a percentage of revenue jumped 26% from 8.7% to 10.4%, which is more than twice the 'AA' category median. However, unaudited results from fiscal 2008 show bad debt falling to 9.8% of revenue. For the four year period fiscal 2004 through fiscal 2007 NMHS' operating margin has averaged 1.7%, which is significantly lower than Fitch's 'AA' 2008 category median of 3.9.%. Year end fiscal 2008 unaudited results show improvement in NMHS' operating margin, with a 3.4% operating margin. NMHS is budgeting for similar results in fiscal 2009. The Stable Rating Outlook reflects Fitch's belief that NMHS' operating margins will remain at current levels over the medium term.
NMHS is an integrated health care delivery system with six owned hospitals, one managed hospital, and a number of health care-related entities. NMHS' flagship hospital is North Mississippi Medical Center, with 621 staffed beds, located in Tupelo, MS, approximately 100 miles southeast of Memphis. The system serves 19 counties in northeastern Mississippi and three counties in northwestern Alabama. Unaudited results from year end fiscal 2008 show NMHS' total revenue at $741 million. NMHS covenants to provide annual and quarterly financial information to bondholders. Continuing disclosure to Fitch has been timely and accurate.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww ... 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.


Fitch Ratings, New York

Gary Sokolow, +1-212-908-9186

Jeff Schaub +1-212-908-0680

Cindy Stoller, +1-212-908-0526 (Media Relations)

mailto:cindy.stoller@fitchratings.com