Fitch Revises Novant Health, No. Carolina, Outlook to Stable on MedQuest Acquisition

Business Wire, August 13, 2007

NEW YORK -- Fitch has affirmed the 'AA-' rating and revised the Rating Outlook to Stable from Positive on approximately $757 million of North Carolina Medical Care Commission Health Care revenue bonds issued on behalf of Novant Health following Novant's announcement to purchase MQ Associates, Inc. (MedQuest), a multi-state diagnostic imaging services provider. MedQuest currently provides imaging services at 91 fixed sites throughout the country with a focus in the Southeast and Southwest. Under the terms of the definitive agreement signed between Novant and MedQuest on Aug. 10, 2007, Novant will pay $45 million to equity holders in cash at closing and assume approximately $358 million in MedQuest debt outstanding. In addition, Novant will give consideration for a $35 million payment to equity holders if certain EBITDA targets are met in 2008. The purchase of the imaging services provider is expected to close on or around Oct. 1, 2007.

The acquisition presents numerous challenges offset by growth opportunities. Novant's liquidity, leverage, and operating profitability will be negatively affected by the acquisition. In addition, the capital-intensive nature of imaging services and labor shortages present additional challenges. Finally, Fitch is concerned that this could dilute management's attention toward its significant capital and strategic growth plans in its two markets. However, these concerns are offset by the higher growth prospects that should occur with the acquisition, the strong complement MedQuest provides to Novant's growing ambulatory presence in its two core markets, and the elimination of a competitive element. Additionally, Novant management has a strong track record of integrating facilities and businesses into the consolidated organization. Fitch believes that Novant will be successful in achieving sizeable costs savings within the first year of assuming control of MedQuest, which will positively affect operating profitability. Fitch expects to review the progress of the integration regularly over the next three years.

Novant's 'AA-' rating is supported by its strong financial profile, solid market position and extensive physician network. Primary credit concerns include Novant's sizeable capital plans and expansion projects, the presence of a strong competitor in the Mecklenburg County area, and the profit concentration of Forsyth Medical Center (Winston Salem). For more information on Novant's rating see Fitch's Nov. 8, 2006 report, which can be found on the Fitch web site at www.fitchratings.com.

Novant is a regional integrated delivery system with eight hospitals (1,989 licensed beds), anchored by Forsyth Medical Center in Winston-Salem (805 licensed beds) and Presbyterian Hospital in Charlotte (531 licensed beds). Novant's corporate headquarters are located in Winston-Salem, NC, with facilities located throughout central North Carolina (Triad region), south-central North Carolina (Southern Piedmont region) and the southeastern coastal region of North Carolina. In fiscal 2006, Novant had total operating revenues of $1.94 billion.

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.