Fitch Rates Iowa Health System's (Iowa) 2009F&G Revs 'AA-'; Outlook Stable

NEW YORK--(Business Wire)--
Fitch Ratings has assigned 'AA-' ratings to the Iowa Finance Authority's
expected issuance of approximately $50 million revenue bonds, series 2009F-G,
issued on behalf of Iowa Health System (IHS). In addition, Fitch affirms the
'AA-' underlying ratings on approximately $600 million of bonds issued for IHS.
The Rating Outlook is Stable.

The preliminary plan of finance includes issuance of $50 million series 2009F&G
bonds as uninsured traditional fixed-rate bonds and long-term interest rate mode
bonds, and a fixed-rate reoffering of $201.3 million of series 2005A
variable-rate demand bonds and $150 million of series 2008A variable-rate demand
bonds. Both the series 2005A and series 2008A bonds are insured by Assured
Guaranty, which is currently rated 'AA' and on Rating Watch Evolving by Fitch.
Proceeds from the series 2009 bonds will be used to fund various renovations and
improvements at its facilities in Dubuque, Sioux City, West Des Moines and
Waterloo and to pay related costs of issuance. The bonds are expected to be
priced/reoffered during the week of July 20, 2009 through negotiated sale.

The rating of 'AA-' is supported by IHS' geographic diversity and breadth of
coverage throughout the State of Iowa, solid liquidity measures, and solid
historical coverage of proforma debt service coverage. IHS is the largest
provider of health care services in Iowa, as one out of every four Iowans
receives care from IHS. In total, the organization operates four hospitals, 142
physician clinics, and is affiliated with 12 community network hospitals and
serves seven main population centers in Iowa. IHS' largest markets are located
in Des Moines, Cedar Rapids, and the Quad Cities, which comprise approximately
67% of IHS' total operating revenues. As of May 31, 2009 (unaudited), IHS had
approximately $801.6 million of unrestricted cash and investments, which
translates into approximately 163 days cash on hand, a cushion ratio of 17.8
times, and cash to debt of 130%. Expected to open in late 2009, IHS' new
hospital construction in West Des Moines is nearly complete as the hospital is
ahead of budget and schedule, which Fitch views positively.

With the exception of fiscal 2008, historical coverage of proforma maximum
annual debt service (MADS) by EBITDA has been on a positive trend over the last
four years and is consistent with Fitch's 'AA' peers. From fiscal 2002 through
fiscal 2007, IHS posted year over year improvement in coverage of proforma MADS
from 3.6 times (x) in 2002 to 5.2x in fiscal 2007. In fiscal 2008, proforma MADS
coverage by EBITDA dipped to 2.6x reflecting the impact of realized losses on
investments. Coverage by operating EBITDA in fiscal 2008 was a solid 4.0x. In
Fitch's analysis, proforma maximum annual debt of $45 million excludes a $23
million bullet maturity occurring in 2015, which is expected to be refinanced
prior to maturity.

Credit concerns include significant competition in most regions and flat
utilization trends. IHS faces significant competition in the six regions
producing 90% of its overall revenue base, three of which include Mercy Health
Network (part of Catholic Health Initiatives and Trinity Health System; revenue
bonds rated 'AA' by Fitch). IHS maintains a secondary market position in the
Dubuque, Sioux City and the Quad Cities regions. Inpatient admissions have
remained relatively flat for the past three fiscal years as inpatient admissions
totaled 101,680 in fiscal 2008, which represents a slight increase from fiscal
2005's total of 99,740. Fitch believes that maintaining operating profitability
will be achieved through cost control and improving efficiency.

As of June 30, 2009 IHS was a counterparty to 17 separate interest-rate swap
agreements with a total notional value of $756.8 million. Approximately $600
million of IHS' swap transactions are fixed payor swaps that synthetically
convert underlying variable-rate bonds to a fixed-rate obligation. Roughly $161
million of total swap exposure represent swap transactions that offset one
another. As of June 30, 2009, the aggregate mark-to-market on IHS' swap
portfolio was negative $48.2 million. However, IHS is not required to post
collateral due to swap insurance on $351.3 million of its swap agreements
provided by Assured Guaranty.

As an additional note, Fitch has withdrawn its 'AA-' long-term rating on the
following bond:

--Iowa Finance Authority (IA) (Iowa Health System) hospital facility revenue
bonds series 1998A.

The rating withdrawal is in conjunction with the advanced refunding of the
above-referenced bonds.

Iowa Health System, headquartered in Des Moines, IA comprises 12 hospitals in
Iowa and two hospitals in Illinois (2,065 aggregate staffed beds), 482 employed
or contracted physicians and various other health care related entities. In
fiscal 2008 total operating revenue was almost $2 billion. IHS covenants to
provide to bondholders annual disclosure of audited financial statements within
180 days of each fiscal year end. It is management's practice to file annual and
quarterly financial information and utilization data with the NRMSIRs, as well
as with DAC and on the IHS web site.

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 Burger, +1-212-908-0555 (New York)
Jim LeBuhn, +1-312-368-2059 (Chicago)
Emily Gander, +1-312-368-3347 (Chicago)
Media Relations
Cindy Stoller, +1-212-908-0526 (New York)
cindy.stoller@fitchratings.com

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