Fitch Places Holy Cross Hospital —Illinois— $25MM Bonds on Rtg Watch Neg

Business Wire, Sept 5, 2002

Business Editors

NEW YORK--(BUSINESS WIRE)--Sept. 5, 2002

Fitch Ratings places the approximately $25 million Illinois Health Facilities Authority revenue bonds (Holy Cross Hospital), series 1994, on Rating Watch Negative, meaning the rating may be lowered in the near term. The current rating is 'BBB'.

The placement of the bonds on Rating Watch Negative is the result of Holy Cross Hospital's (Holy Cross) significantly deteriorated financial position. Holy Cross has lost about $54.9 million from operations over the last four years, including a loss of $16.2 million from operations in fiscal 2001 (June 30 year-end) and a loss of $15.6 million from operations in fiscal 2002 (unaudited). As a result, maximum annual debt service coverage by earnings before interest, taxes, depreciation and amortization has declined to negative 4.2 times (x) in 2002 from 3.9x in 1998. These significant operating losses have deteriorated Holy Cross' liquidity position as Holy Cross' unrestricted liquidity has declined by nearly two-thirds from $21.2 million as of June 30, 1999 to $7.4 million as of June 30, 2002. Days cash on hand dropped to a low 25 days at June 30, 2002 from 83 days at June 30, 1998. Significant concerns include Holy Cross' rising labor costs and bad debt expense. In fiscal 2001, personnel costs and bad debt expense as a percent of revenues were very high at 63% and 16.6%, respectively.

Fitch will discuss Holy Cross' downturn in financial performance with management on Sept. 10, 2002, and believes that a multi-notch downgrade of the rating is likely.

Located in southwest Chicago, Holy Cross Hospital is an acute-care community hospital that operates 241 of 331 licensed beds. Disclosure of financial and operating statements to Fitch has not been timely.