Fitch Places Pascack Valley Hospital's — New Jersey— 'BBB-' Rating on Watch Negative

Business Wire, June 8, 2004

Business Editors

NEW YORK--(BUSINESS WIRE)--June 8, 2004

Fitch Ratings has placed the 'BBB-' rating for the $51.2 million New Jersey Health Care Facilities Financing Authority revenue bonds (Pascack Valley Hospital Association Issue), series 2003 and the $34.9 million series 1998 bonds on Rating Watch Negative.

The Rating Watch Negative is due to Pascack Valley Hospital's (PVH) large unexpected operating loss in 2003. Fitch has just received PVH's 2003 audit (fiscal year ended Dec. 31) in which PVH posted a negative 8.4% operating margin ($11.2 million operating loss), falling well below its 2003 operating budget ($1.2 million operating gain). PVH's excess margin of negative 7.8% ($10.5 million operating loss) in 2003 resulted in a debt service coverage ratio of negative 0.3 times (x) as calculated by Fitch, well below PVH's covenant of 1.1x. As such, a covenant default is expected. Fitch plans to further review the credit next week after discussion with PVH's management team.

PVH is the sole obligor of the series 2003 and 1998 bonds. Fitch's analysis utilized financial statements of PVH, which accounts for approximately 90% of parent and sole corporate member Well Care Group (WCG)'s revenue. Fitch's next review will utilize the financial statements of WCG.

Located in Westwood, NJ, approximately ten miles from Hackensack, PVH is a 291-licensed bed general acute-care facility. In 2003, total operating revenues for PVH were $134 million. PVH has covenanted to provide quarterly disclosure to bondholders, which has been timely. However, Fitch notes that PVH's 2003 year-end unaudited disclosure indicated operating income of $485,000, a significant variance from audited results.