Fitch Affirms LifePoint Hospitals, Inc. at 'BB-'; Stable Outlook

Business Wire, April 28, 2008

CHICAGO -- Fitch Ratings has affirmed the following ratings for LifePoint Hospitals, Inc. (LifePoint):

--Issuer Default Rating (IDR) 'BB-';

--Secured bank credit facility 'BB-';

--Senior subordinated convertible notes 'B'.

The Rating Outlook is Stable.

LifePoint's ratings continue to reflect relatively strong EBITDA margins and improvement in free cash flow balanced against high levels of bad debt and increasing operating expenses. Free cash flow improved from $46.4 million in 2006 to $99 million in 2007 and margins increased from 1.90% to 3.76%. In addition, total debt outstanding declined from approximately $1.67 billion to $1.52 billion during the same period. Fitch expects some deterioration in the leverage ratio in 2008 as LifePoint becomes more acquisitive and completes the $150 million share repurchase program that was instituted in November 2007.

LifePoint has improved its credit metrics through debt reduction and lower interest expense. However, Fitch expects moderate deterioration in the leverage ratio and EBITDA margins as LifePoint returns to the acquisition market in 2008. Further concerns for the credit profile are the persistent industry trends of growing bad debt and an increase in the uninsured population. For fiscal year-end (FYE) 2007 and 2006, bad debt as a share of revenue was 11.9% and 10.9% respectively. Along with industry-related issues, LifePoint experienced volume declines with the same-store equivalent admissions growth slowing from 0.9% to 0.5%. This may partially be due to the late flu season as well as market-specific challenges.

LifePoint had debt of approximately $1.52 billion outstanding at Dec. 31, 2007, with $318.7 million available under the credit facility and $53.1 million in cash on the balance sheet. The bank indenture provides additional tranches of $100 million under the revolver, $400 million under the term facility, and the flexibility to issue $250 million of a new term facility. The credit agreement for the $706 million senior term facility and the revolver maturing 2012 and the indenture for the $575 million and $225 million convertible subordinated notes maturing 2014 and 2025 contain change of control provisions. The bank indenture also includes limitations on additional debt and other transactions and contains financial covenants allowing for minimum interest coverage of 3.5 to 1 and maximum leverage of 4.25 to 1 in 2008 with a step-down to 4 to 1 in 2009. There are also limitations on capital expenditures of no more than 10% of revenues.

LifePoint's latest twelve months (LTM) EBITDA ended Dec. 31, 2007 was $459.3 million, resulting in leverage (total debt/EBITDA) of 3.30 times (x) and interest coverage (EBITDA/total gross interest) of 4.72x. The company's LTM free cash flow was $99 million at Dec. 31, 2007. Fitch expects free cash flow to moderately decline in 2008. The debt maturity schedule appears to be manageable for LifePoint with no significant maturities until 2011, with $529.9 million due.

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