Fitch Rates University of Colorado Hospital Auth 2008A & B Bonds 'BBB+' Underlying; Outlook Positive

Business Wire, June 13, 2008

CHICAGO -- Fitch Ratings has assigned a 'BBB ' underlying ratings to the University of Colorado Hospital Authority's (UCH) expected issuance of $19.0 million series 2008A and $73.7 million series 2008B variable rate demand revenue bonds. In addition, Fitch affirms the 'BBB ' rating on UCH's approximately $530 million of bonds outstanding. The Rating Outlook is Positive.

Proceeds from the series 2008B bonds will be used to refund UCH's series 2007A bonds currently outstanding while proceeds from the series 2008A bonds will fund various capital projects. The series 2008A and B bonds are expected to be structured as weekly variable rate demand revenue bonds that will be secured by bank letters of credit (LOC). Fitch expects to assign long-term and short-term ratings to the series 2008 bonds based on the bank LOC sometime next week. The bonds are expected to be offered through negotiated sale during the week of June 23rd.

The 'BBB ' rating reflects UCH's integral relationship with the University of Colorado Denver (UCD) School of Medicine, UCH's strong clinical reputation, the benefits of relocation of all inpatient clinical service to the Anschutz Medical Campus and solid utilization growth. Although legally separate, UCD and UCH maintain a close relationship through collaboration in the areas of clinical care, teaching, and research. Through an affiliation agreement, UCD must utilize UCH as its primary teaching site and, as such, UCH is the only academic medical center in Colorado. Fitch believes that the authority is beginning to realize greater efficiencies and improved financial results now that all inpatient and emergency services have been transferred to the Anschutz Medical Campus and that management has implemented improved cost control and performance based budgeting. Through the nine months ended March 31, 2008 income from operations improved to $20.2 million (4.2% operating margin) as compared to an $8.7 million loss from operations (negative 2.0% operating margin) in the year-earlier period. UCH's operating EBITDA margin for the nine month interim period is a robust 13.9%. Utilization volumes through the nine months interim period continue to grow with inpatient admissions and inpatient and outpatient surgical volumes ahead of the prior year.

Credit concerns include UCH's high debt burden, low liquidity indicators and a competitive service area. At fiscal 2007, maximum annual debt service (MADS) as percentage of total revenues of 5.3%, debt-to-EBITDA of 7.6%, and debt-to-capitalization of 62.2% are weaker than Fitch's 'BBB' medians of 3.3%, 3.9% and 47.0%, respectively. UCH's position of unrestricted cash and investment increased to $242.6 million at March 31, 2008 from $229.1 million at June 30, 2007 and translates to 163.1 days cash on hand and a light 45.7% of long-term debt. Finally, the Denver metropolitan market is very competitive with several large system providers including Exempla Health, HealthOne, Denver Health System, and Centura (a joint venture of Adventist Health System-Sunbelt long-term debt rated 'AA-' by Fitch and Catholic Health Initiatives, long-term debt rated 'AA').

The Positive Rating Outlook reflects the successful transfer of inpatient operations to the Anschutz Medical Campus and the qualitative attributes that accrue to UCH as the primary teaching hospital for UCD. Fitch believes that UCH occupies a unique position (both clinically and politically) within the healthcare landscape as the only academic medical center in the State of Colorado. A rating upgrade is contingent on UCH generating solid and sustained operating profitability consistent with the 'A' category. No additional debt is planned at this time.

UCH had 389 beds in operation as of June 30, 2007 at the Anschutz Medical Campus in Aurora, CO. UCH covenants to provide bondholders with audited annual information within 150 days of fiscal year-end and unaudited quarterly statements within 60 days of quarter-end to the national recognized municipal securities information repositories. The content of UCH's disclosure is excellent and includes a balance sheet, income statement, cash flow statement, utilization statistics, and management discussion and analysis.

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.