TEXT-Fitch affirms St. Jude Children's Research Hospital, Tenn. at 'AAA'
Jan 30 - Fitch Ratings has affirmed the 'AAA' rating on the approximately $234 million Shelby County Health, Educational, and Housing Facility Board, Tennessee revenue bonds, series 2006 issued on behalf of St. Jude Children's Research Hospital (St. Jude). This is the only debt outstanding and is 100% fixed rate. The Rating Outlook is Stable. SECURITY The bonds are secured by an unrestricted revenue pledge of the hospital and an unconditional guaranty by the American Lebanese Syrian Associated Charities (ALSAC). Under the guaranty agreement, ALSAC has guaranteed the full and prompt payment of the series 2006 bonds. SENSITIVITIES/RATING DRIVERS REPUTATION AND BRAND RECOGNITION: St. Jude is one of the world's premier centers for research and treatment of catastrophic diseases in children. Through ongoing support from its affiliated organization, ALSAC, St. Jude provides care, treatment and support services at no cost to families. IMPRESSIVE FUNDRAISING RECORD: All funds raised by ALSAC are for the sole benefit of St. Jude. ALSAC was started by Danny Thomas and its total endowment has grown to $2.4 billion. Annual fundraising has increased every year through the current depressed economic environment with unrestricted contributions and support of $797 million in fiscal 2012 (June 30 year end). OVERALL STRONG FINANCIAL PROFILE: St. Jude/ALSAC's financial profile is characterized by very strong liquidity and low debt burden with 695 days cash on hand, 6.8x unrestricted cash to debt, and 14x debt service coverage in fiscal 2012. CREDIT PROFILE The rating affirmation reflects St. Jude's reputation and brand recognition, which has led to strong fundraising activity by ALSAC. The bylaws of ALSAC require that all funds raised (except for funds required for operations and restricted by donor) be distributed to or be held for the exclusive benefit of St. Jude. ALSAC has had very strong fundraising success, raising $691.9 million in fiscal 2010, $735.2 million in fiscal 2011, and $813.6 million in fiscal 2012. The target for fiscal 2013 is $832 million. The vast majority of donors are individuals through its national direct marketing efforts (television and mail). ALSAC's fundraising goal is to increase the amount raised 3%-5% every year over the next five years. St. Jude and ALSAC are integral to each other's success and strategic planning is done jointly. ALSAC sets an annual fundraising target every year based on the hospital's projected need. In 2012, ALSAC provided approximately 69% of St. Jude's $640.2 million total revenue. St. Jude's and ALSAC's total combined unrestricted revenue in fiscal 2012 was $979 million and included $797 million of contributions and bequests, $96 million of net patient revenue, and $95 million in research grants. The remaining revenue sources include net investment losses and other revenue. St. Jude/ALSAC's financial profile is strong with ample coverage and cushion provided by its financial resources relative to debt and operations. ALSAC had $2.4 billion in total investments as of Dec. 31 2012, which was invested in 35.6% equities, 24.6% hedge funds, 7.6% private investments, 15.9% real assets, 1.6% multi asset managers and 14.7% cash and fixed income. The portfolio is diverse and ALSAC has not changed its investment policy. The liquidity of the portfolio is also good with over 50% available within three months, 77% within six months and 80% within one year. The Stable Outlook reflects the expectation that St. Jude/ALSAC will continue to produce excellent financial results as the result of its strong fundraising abilities. St. Jude conducts research and treatment for childhood cancers and diseases and treats patients regardless of their ability to pay. The hospital provides inpatient and outpatient services to approximately 5,700 active patients every year. Patients are accepted based on their eligibility to enroll in clinical research protocols. St. Jude has entered into the second phase of its pediatric genome project in conjunction with Washington University School of Medicine in St. Louis to decode the genomes of more than 600 childhood cancer patients. There are no other major capital projects on the horizon beyond what is currently under construction. Tower II, which will replace St. Jude's intensive care unit and operating rooms is expected to be complete in fiscal 2014. St. Jude will also add proton beam therapy by fiscal 2016. The cost of these projects total approximately $200 million. There are no additional debt plans. St. Jude is a 78-licensed bed pediatric specialty hospital and research organization (with associated outpatient clinics and other facilities). St. Jude is located in Memphis, Tennessee and is the only NCI designated cancer center devoted solely to children. St. Jude/ALSAC posts its audited annual financial statements and unaudited quarterly financial statements to the Nationally Recognized Municipal Securities Information Repositories. Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings. Applicable Criteria and Related Research: 'Revenue-Supported Rating Criteria', dated June 12, 2012 'Nonprofit Institutions Rating Criteria', dated June 15, 2012 'Fitch Upgrades St. Jude Children's Research Hospital's (Tennessee) Bonds to 'AAA'' , dated Feb 14, 2011 Applicable Criteria and Related Research: Revenue-Supported Rating Criteria Nonprofit Institutions Rating Criteria
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