Fitch Rates CoxHealth (Missouri) 2008A-C 'A'; Outlook Stable

CHICAGO--(Business Wire)--
Fitch Ratings has assigned an 'A' rating to the following new
issues for the Health and Educational Facilities Authority of the
State of Missouri (issued on behalf of CoxHealth):

--$159.9 million fixed-rate revenue and refunding bonds, series
2008A;

--$70 million series fixed-rate revenue and refunding bonds,
series 2008B;

--$35 million variable-rate revenue bonds, series 2008C.

In addition, Fitch has assigned 'A' ratings on the following
outstanding debt for CoxHealth:

--$12.6 million bonds, series 1992H

--$29.9 million bonds, series 1993I

The Rating Outlook is Stable.

Proceeds from the series 2008A bonds will be used to refund
approximately $21.9 million of outstanding series 1997 bonds and
approximately $57.9 million of outstanding series 2002 bonds issued by
CoxHealth, fund approximately $52.8 million in routine and long-term
capital expenditures, reimburse approximately $15 million of prior
capital expenditures, and fund capitalized interest. In advance of the
issuance of the series 2008A bonds, CoxHealth executed a $200 million
fixed spread basis swap with Merrill Lynch as the counter party with
the intent of lowering costs on the traditional fixed rate bonds
through the assumption of tax risk.

Approximately $98.5 million of the proceeds from the series
2008B&C bonds will finance a new emergency department; a new
ambulatory surgery center; a new parking garage; fund renovation of
space for future dedication to Orthopedic services, fund capitalized
interest, and pay cost of issuance. The series 2008A bonds are
expected to be issued as uninsured fixed-rate bonds while the series
2008B&C bonds are expected to be issued as variable-rate demand bonds
backed by a direct pay letters of credit (LOC) from Bank of Nova
Scotia (series 2008B) and Bank of America, N.A. (series 2008C).

Fitch expects to assign long-term and short-term ratings to the
series 2008B&C bonds based on the banks' support at a date closer to
pricing. The series 2008A bonds are expected to be priced the week of
Sept. 8 while the series 2008B&C bonds are expected to be priced the
week of Sept. 22. The series 2008A-C bonds will be secured by a gross
revenue pledge of the Obligated Group, a mortgage, and a debt service
reserve fund, which is viewed positively. Moreover, the liquidity and
coverage covenants on the series 2008 bonds are expected to be similar
to CoxHealth's existing covenant package.

The rationale for the 'A' rating reflects CoxHealth's solid
balance sheet indicators, its good proforma debt service coverage,
moderate debt burden, improved operating performance, and solid
alignment with its medical staff. CoxHealth enjoys a leading inpatient
market share position in its primary service area (37.3% compared to
its nearest competitor at 35.6%), which has allowed it to strengthen
its unrestricted cash position relative to its pro forma debt service
and its operating expenses despite reserving $60 million to settle the
ongoing investigation by the U.S. Department of Justice (DoJ) (see
paragraph to follow).

Through the interim period ending May 31, 2008, CoxHealth reported
unrestricted cash of $301.9 million resulting in a pro forma cushion
ratio of 12.8 times (x) and days cash on hand of 203.9 days, compared
to the 'A' category medians of 15.4x and 185.2 days, respectively.
Furthermore, CoxHealth's pro forma maximum annual debt service (MADS)
of $23.5 million is a moderate 3.2% of May 31, 2008 revenues ($487.9
million) and is covered by earnings before interest, depreciation, and
amortization (EBIDA) at 3.7x, both in-line than Fitch's 'A' median of
3.1% and 4.0x, respectively.

CoxHealth has been subjected to a three-year investigation by the
U.S. Department of Justice (DoJ) resultant from self-reported billing
errors that occurred in 2005 and has recently signed a settlement
agreement with the DoJ. The settlement calls for an initial payment of
$35 million with five additional $5 million payments per year with an
annual interest of 4% on the deferred amounts. In a separate agreement
with the Office of Inspector General of the U.S. Department of Health
and Human Services (HHS), CoxHealth agreed to participate in a
five-year program of intensified legal compliance education for
employees, physicians and others associated with CoxHealth, as well as
heightened monitoring and reporting to HHS. Fitch believes CoxHealth's
robust corporate compliance function protects bondholders from future
substantial cash outlays due to compliance issues and believes the
settlement now allows management to focus on the core operations of
CoxHealth, which should further strengthen performance.

The Stable Outlook reflects the rapid operating improvement at
CoxHealth since the billing irregularities of 2005, as evidenced by
operating margins and operating EBIDA margins increasing to 3.8% and
9.8%, respectively through May 31, 2008 from (0.3%) and 5.8%,
respectively in fiscal 2005. Further lending stability to the market
is Springfield's unique managed care market, which is essentially
closed; whereby each managed care contract is exclusive to either
CoxHealth or one of its competitors. The closed nature of the market
also extends to physicians, naturally aligning them with either
CoxHealth or its competitors. CoxHealth enjoys an exclusive, long-term
relationship with the Ferrell-Duncan clinic, a 100 physician
multi-specialty group with primary offices located adjacent to
CoxHealth's 565-bed South campus. Fitch views CoxHealth's relationship
with this large physician practice and the closed managed care market
as a credit strength.

CoxHealth has covenanted to provide quarterly and annual
disclosure of financial statements to bondholders. Recent disclosure
to Fitch has been excellent and includes a balance sheet, income
statement, utilization statistics, statement of cash flows and
management discussion and analysis.

Located in Springfield, Missouri, CoxHealth provides acute
hospital and other health care services to a service area of 22
counties covering southwest Missouri and parts of northern Arkansas.
CoxHealth owns and operates three tertiary hospital facilities
licensed for a total of 802 beds in Springfield, Missouri. The system
also operates a skilled nursing facility, a psychiatric and
rehabilitation facility, over 50 outpatient physician clinic
locations, a home care company, a health plan, and a foundation. In
fiscal 2007 (ending Sept. 30), the system had total revenues of $948.2
million, over 32,661 inpatient admissions and 144,850 ER visits.

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
Anthony A. Houston, 312-368-3180 (Chicago)
Gary Sokolow, 202-908-9186 (New York)
Media Relations:
Cindy Stoller, 212-908-0526 (New York)

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