Fitch Affirms West Orange Healthcare District (Florida) at 'A-'; Rating Outlook Stable

2008-08-20 23:54:03 -

- Fitch Ratings has affirmed the 'A-' underlying rating on West Orange Healthcare District's approximately $64 million in outstanding 1999A-B and 2001A revenue bonds. The Rating Outlook is Stable.

The affirmation of the 'A-' is supported by West Orange Healthcare District's (Health Central) very strong liquidity indicators, low debt burden, and strategic capital expenditures. As of Sept. 30, 2007,

Health Central had $81.8 million of unrestricted cash and investments equating to 229.1 days cash on hand (DCOH) and 127.2% cash-to-debt. These ratios exceed Fitch's 'A' category medians of 185.2 days and 111.6%, respectively. Major credit concerns are Health Central's high bad debt expense, market area dominated by large competitors, and historically weak operating performance. Bad debt as a percent of total revenue has increased from 14.2% in fiscal 2005 to 19% in fiscal 2007. Despite the negative operating performance in fiscal 2007, (operating margin of -0.2%), debt service coverage improved to a strong 3.6 times (x) in fiscal 2007, up from 2.8x in fiscal 2003, the last time Fitch rated the bonds.

The Stable Outlook reflects Fitch's opinion that Health Central will continue to generate sufficient cash flow from operations to support its strong balance sheet and fund future capital needs. While no large scale projects are expected for the existing campus, management expects to spend $7-$9 million dollars each year on capital improvements which should offset the rising average age of plant that has occurred over the past few years. Additionally, Health Central is expecting construction to begin on a 75,000 square foot medical office building later this fall that will be built to the same scale as the hospital and house roughly 25 doctors. The hospital expects the addition of the new medical office building as well as a partnership with a public health clinic to improve utilization figures beginning in fiscal 2009. Additionally, Health Central has entered into a group purchasing agreement for supplies with Orlando Regional Health System, which should help limit growth in the cost of supplies. An ongoing concern is that even though Health Central has a solid position in West Orange County, it is a relatively small player in the greater Orlando market, particularly when compared to the larger Orlando Regional Healthcare System (rated 'A') and Florida Hospital.

Located in Ocoee, Florida (11 miles west of downtown Orlando), Health Central is a community health care provider operating a 171-staffed bed hospital, a 228-bed nursing home, and other related entities.

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Fitch Ratings
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Cindy Stoller, 212-908-0526
(Media Relations, New York)