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| [September 28, 2012] |
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Fitch Rates California Health Facilities Financing Auth Insured Rev Bonds 'A-'
NEW YORK --(Business Wire)--
Fitch Ratings assigns an 'A-' rating to $65 million in California Health
Facilities Financing Authority insured revenue bonds (Chinese Hospital
Association), series 2012, based on the support provided by the
Cal-Mortgage Loan Insurance Division.
The bonds are expected to sell via negotiated sale on or about Nov. 1,
2012.
The Rating Outlook is Stable.
SECURITY
The bonds will be insured by the State of California Office of Statewide
Health Planning and Development (OSHPD). If moneys are not available to
pay debt service, OSHPD will be obligated to continue to make payments
on the bonds; if necessary, the state's treasurer will issue debentures
to holders of the bonds fully and unconditionally guaranteed by the
State of California, whose general obligation bonds (GO) are rated 'A-'
by Fitch.
KEY RATING DRIVERS
--ENHANCEMENT LINKED TO STATE GO RATING: The rating is based on the
support provided by the Cal-Mortgage Loan Insurance Division of the
State of California. If defaults on loans deplete the reserve balance in
the health facility construction loan insurance fund (HFCLIF), the
state's treasurer is required to issue debentures on parity with the
state's GO bonds. This results in a rating on par with that assigned to
state GO bonds.
--WEALTHY, DIVERSE ECONOMY: The state's economy is wealthy and unmatched
among U.S. states in its diversity and breadth. Growth has resumed after
severe, widespread recessionary conditions.
--HISTORY OF BUDGET AND CASH STRESS: State finances are subject to
periodic, severe budget and cash flow crises due to structural
imbalances, revenue cyclicality and institutional inflexibility.
--VOLATILE REVENUES: State revenues are volatile, notably the component
tied to personal income. Modest revenue growth has resumed since the
downturn although the course of future collections is uncertain.
--TANGIBLE STRUCTURAL PROGRESS: Deep spending cuts in the last two
adopted budgets have significantly lowered the state's structural
imbalance. Among many challenges to maintaining structural progress is
the state's historical inability to achieve and sustain budgeted
expenditure reductions.
--VOTER INITIATIVES LIMIT FLEXIBILITY: Constraints imposed by voter
initiatives and a partisan policy-making environment have repeatedly
hindered timely, effective action on fiscal challenges.
--MODERATE DEBT BURDEN: Tax-supported debt is moderate, but has grown in
the last decade for infrastructure needs and budgetary borrowing.
WHAT COULD TRIGGER A RATING CHANGE
--Changes to existing Cal-Mortgage program parameters.
--Changes to the state's GO bond rating, to which this rating is linked.
CREDIT SUMMARY
Cal-Mortgage is a division of the State of California OSHPD.
Cal-Mortgage's mission is to improve access to capital for qualifying
health care faciities without cost to taxpayers. The agency primarily
guarantees debt issued on behalf of nonrated and below-investment grade
health care institutions that demonstrate community need.
Bond proceeds will be used to construct and equip a new hospital
facility of the Chinese Hospital Association, a non-profit healthcare
organization that operates a hospital in the Chinatown neighborhood of
San Francisco, California, and several clinics in and around San
Francisco. The new hospital facility will be adjacent to the existing
hospital facility. Proceeds will also fund capitalized interest during
construction and a bond reserve account.
The Cal-Mortgage program was originally authorized by voters in 1968. As
of June 30, 2012, Cal-Mortgage insured $1.71 billion in outstanding
loans covering 122 facilities. The statutory maximum insured risk is $3
billion, although this level has never been reached. Bonds insured by
Cal-Mortgage generally require a debt service reserve, the balance of
which totals $148.1 million as of June 30, 2012. In addition, the bonds
have access to the health facility construction loan insurance fund
(HFCLIF), a special fund which receives fee and premium income, among
other receipts, and is segregated from the state's general fund and
unavailable for general fund cash flow purposes. The HFCLIF balance was
$172.9 million as of June 30, 2012.
In the event of a default by an insured borrower, debt service reserves
and the HFCLIF balance are available to bondholders. If defaults on
insured loans ever caused the HFCLIF and debt service reserves to be
depleted, statutes and transaction documents require the state treasurer
to issue debentures on parity with the state's GO bonds in the amount of
principal and interest due but not paid, at a payment schedule and
coupon rate identical to those of the bonds associated with the
defaulted loan. These provisions support a rating on Cal-Mortgage equal
to that of the state's GO bonds, currently rated 'A-', with a Stable
Outlook by Fitch.
For further information on the State of California's GO bond rating,
please refer to Fitch's rating action commentary dated Sept. 14, 2012,
available on Fitch's web site at 'www.fitchratings.com'.
Additional information is available at 'www.fitchratings.com'.
The ratings above were solicited by, or on behalf of, the issuer, and
therefore, Fitch has been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
--'Tax-Supported Rating Criteria', dated Aug. 14, 2012;
--'U.S. State Government Tax-Supported Rating Criteria', dated Aug. 14,
2012;
--'State Credit Enhancement Program Criteria', dated June 19, 2012.
Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm rpt_id=686015
U.S. State Government Tax-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm rpt_id=686033
Rating Guidelines for State Credit Enhancement Programs
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm rpt_id=681239
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND
DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING
THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS.
IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE
AVAILABLE ON (News - Alert) THE AGENCY'S PUBLIC WEBSITE '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.
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