Fitch Rts Michigan State Hosp Auth Rev Refunding Bonds (McLaren Health Care) Series 2008B 'AA+/F1+'

2008-07-24 21:59:06 -

- Fitch Ratings assigns a rating of 'AA+/F1+' to the $173,965,000 Michigan State Hospital Finance Authority revenue refunding bonds (McLaren Health Care) series B (the Bonds). The long-term 'AA+' rating is based jointly on the long-term 'AA-' rating assigned by Fitch to McLaren Health Care, (see press release of June 25, 2008 available at www.fitchrating.com) and the support provided by an irrevocable, direct-pay letter of credit (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.

The long-term 'AA+' rating is based on Fitch's methodology which considers the 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 a no more than a medium degree of correlation. Fitch has determined a low degree of correlation which results in a rating of 'AA+/F1+'for the bonds. If either the underlying bond rating of McLaren or the rating of JPMorgan Chase Bank, N.A. were to be downgraded to 'A-' or lower, the joint probability methodology would no longer be applicable and the long-term rating would then reflect the higher of the two ratings.

The bank is obligated to make payments of principal, interest and purchase price when due. The rating on the bonds will expire upon the earliest of: Aug. 15, 2011, the expiration date of the LOC, unless extended; any prior termination of the LOC; or defeasance of the bonds. The LOC provides full coverage of principal plus an amount equal to 35 days of interest computed at a maximum rate of 15%, based on a year of 365 days, and purchase price for tendered bonds, while in the weekly rate mode. The remarketing agent for the bonds is Citigroup Global Markets, Inc. The bonds are expected to be available for delivery on or about Aug. 6, 2008.

The bonds initially bear interest in a weekly rate mode, but may be converted to a daily, bond interest term or long-term interest rate mode. While bonds bear interest in the weekly rate mode, interest payments are paid on the first Wednesday of each calendar month, commencing Sept. 3, 2008 and bondholders have the option to tender their bonds on any business day, with the requisite prior notice. The bonds are subject to mandatory tender on (1) conversion of the interest rate mode, (2) on the day next succeeding the last day of each bond interest term, and (3) the expiration, termination or substitution of the LOC or upon the occurrence of an event of default under the LOC Reimbursement Agreement directing the Trustee to cause a mandatory tender of the Bonds.

Optional and mandatory redemption provisions also apply to the 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.

Fitch Ratings
Linda Friedman, 212-908-0727, New York
(for information on the series 2008A bonds)
Jim LeBuhn, 312-368-2059, Chicago
(for information on McLaren Health Care)
or
Media Relations:
Sandro Scenga, 212-908-0278, New York