2009-11-25 19:03:02 -

Fitch Ratings has assigned its 'BB' rating on the expected issuance of approximately $43.3 million City of Alhambra, California revenue bonds (Atherton Baptist Homes Project), series 2009A and 2009B. The Rating Outlook is Stable.

The series 2009A bonds ($28.7 million) will be issued as fixed-rate bonds and will amortize over 30 years. The series 2009B bonds ($14.6 million) will be issued

as fixed-rate bonds and are expected to be retired from initial entrance fees. Bond proceeds will fund the construction of 50 independent living apartments, related amenities and a new parking structure on Atherton's campus, fund a debt service reserve fund, and retire approximately $9 million in outstanding loans.
The bonds are expected to sell via negotiation in December 2009.

The 'BB' rating considers the construction and fill-up risk of the project in a difficult economic environment balanced by Atherton's long history and stable occupancy rates, and adequate liquidity relative to expenses. Atherton is a continuing care retirement community that was established in 1914 and has been at its current location since 1926.
Annual occupancy at Atherton's independent living apartments (ILUs) has averaged around 87% rate since 2005. Through the nine-month interim period ending Sept. 30, 2009, Atherton had $6.5 million in unrestricted cash and investments, translating into 207 days-cash-on-hand (DCOH).

Other rating drivers include Atherton's high debt burden, its small revenue base, and operating pressures resulting from the overall downturn in the U.S. economy. With this issuance, Atherton's pro forma debt burden is very high, resulting in a pro forma cash-to-debt position of 22%, before occupancy of new units, and after repayment of the series 2009B from entrance fees. Pro forma MADS as a percent of revenues is also very high at 20.2% and is covered at 0.8 times (x) (at fiscal year-end 2008). In addition, due to its smaller revenue base, Fitch believes that unexpected vacancies or longer than expected turnover of apartments and assisted living units (ALUs) could cause a greater volatility in Atherton's financial performance, especially in light of the challenging operating environment facing continuing care retirement centers during the recession.

The Stable Rating Outlook reflects Fitch's belief that Atherton will continue to experience very good occupancy rates through the construction period, will maintain its focus on revitalizing its current facilities through measured increases in entrance fees and services fees, and will be successful in completion of its construction project on time and on budget.

Atherton is located on a 15-acre campus in Alhambra, California, approximately 10 miles east of downtown Los Angeles. The facility consists of 170 ILUs, 32 ALUs, six memory-loss ALUs, and 99 SNF beds.
Total revenue in 2008 was $13 million. Atherton has covenanted to provide annual and quarterly disclosure through the Municipal Rule Making Board's EMMA system.

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Fitch RatingsMichael Borgani, +1-415-732-5620 (San Francisco)Jim
Mitchell, +1-813-222-1395 (Tampa)Media Relations:Cindy
Stoller, +1-212-908-0526 (New York) cindy.stoller@fitchratings.com : mailto:cindy.stoller@fitchratings.com