Fitch Affirms NCMC, Inc. Revs at 'A+'; Outlook Stable

SAN FRANCISCO--(Business Wire)--
Fitch Ratings has affirmed its 'A+' rating on approximately $186.4 million in
Colorado Health Facilities Authority revenue bonds outstanding issued on behalf
of NCMC, Inc. The Rating Outlook is Stable. Fitch notes that NCMC plans to
convert its series 2003A&B ($91.2 million) auction-rate bonds to fixed-rate
mode. The bonds are scheduled to be remarketed during the week of July 13, 2009.

The rating affirmation is supported by the operating agreement between NCMC and
Banner Health (Banner; rated 'AA-' by Fitch), support and resources provided by
Banner, leading market share in NCMC's primary service area, and NCMC's strong
profitability and good liquidity position. The operating agreement between NCMC
and Banner is non-cancellable for 15 years and expires on Dec. 31, 2017. Per the
agreement, Banner has agreed to pay to NCMC rent, which NCMC expects to be the
primary source of payment for debt service on NCMC's outstanding debt. The rent
owed by Banner to NCMC serves as a limited guarantee on NCMC's outstanding debt,
whereby Banner has guaranteed payment of principal and interest when due in an
amount equal to the rent owed by Banner under the operating agreement. Banner's
relationship with NCMC also provides large system capabilities such as
single-signature managed care contracting, strong supply purchasing capability,
and access to good information technology. The support from Banner as well as
NCMC's leading 55.6% primary service area market share have contributed to
NCMC's strong operating performance in recent years. Financial results for the
last three years and year-to-date show double-digit operating EBITDA margins
coupled with very strong cash flow generation, all above Fitch's medians for the
'A' rating category. In fiscal year (FY) 2008 and through the interim period,
NCMC's profitability has been very strong. NCMC reported an operating income of
$15.8 million (4.4% margin) in FY08 and $9.9 million (6.5%) through the five
months ending May 31, 2009. Operating EBITDA results were similarly strong with
operating EBITDA margins of 12.8% and 13.9% over the respective periods. NCMC
also benefits from very good debt service coverage, with Proforma MADS coverage
of 3.4 times (x) at fiscal year-end 2008. Lastly, NCMC still maintains a good
liquidity position with unrestricted cash of approximately $176.7 million on May
31, 2009, translating to 224.5 days cash on hand.

Concerns continue to center on the term-length of the operating agreement in
relation to bond maturities and NCMC's relatively high debt burden. In addition,
Fitch remains watchful of increased competition from Poudre Valley Hospital -
NCMC's primary competitor - and Medical Center of the Rockies. The 15-year term
of the operating agreement creates the potential for non-renewal and uncertainty
over NCMC's operations before the bonds reach maturity. NCMC's debt burden is
relatively high with cash-to-debt at 86.7% and Proforma MADS as a percentage of
revenue was 4% in 2007.

The Stable Outlook is based on Fitch's belief that NCMC will continue to achieve
operating and financial results that are in line with budget targets. Moreover,
Fitch believes NCMC will remain an important part of Banner's strategy over the
longer term, although failure to renew the current operating agreement prior to
its expiration in 2018 could have a negative impact on NCMC's operations.

NCMC is a full-service tertiary hospital with 398 licensed and 279 staffed beds,
as well as other related entities, located in Greeley, Colorado. NCMC had total
revenues of $362.4 million in fiscal 2008. NCMC covenants to provide annual and
quarterly financial information through the nationally recognized municipal
securities information repositories, which Fitch views positively. Disclosure to
Fitch has been adequate and includes quarterly balance sheet and income
statement but no cash flow statement or utilization statistics.

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
Michael Borgani, +1-415-732-5620 (San Francisco)
James LeBuhn, +1-312-368-2059 (Chicago)
Media Relations:
Cindy Stoller, +1-212-908-0526 (New York)
cindy.stoller@fitchratings.com

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