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| [January 30, 2013] |
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Fitch Affirms St. Jude Children's Research Hospital's (Tennessee) Bonds at 'AAA'; Outlook Stable
NEW YORK --(Business Wire)--
Fitch Ratings has affirmed the 'AAA' rating on the approximately $234
million Shelby County Health, Educational, and Housing Facility Board,
Tennessee revenue bonds, series 2006 issued on behalf of St. Jude
Children's Research Hospital (St. Jude).
This is the only debt outstanding and is 100% fixed rate. The Rating
Outlook is Stable.
SECURITY
The bonds are secured by an unrestricted revenue pledge of
the hospital and an unconditional guaranty by the American Lebanese
Syrian Associated Charities (ALSAC). Under the guaranty agreement, ALSAC
has guaranteed the full and prompt payment of the series 2006 bonds.
SENSITIVITIES/RATING DRIVERS
REPUTATION AND BRAND RECOGNITION: St. Jude is one of the world's premier
centers for research and treatment of catastrophic diseases in children.
Through ongoing support from its affiliated organization, ALSAC, St.
Jude provides care, treatment and support services at no cost to
families.
IMPRESSIVE FUNDRAISING RECORD: All funds raised by ALSAC are for the
sole benefit of St. Jude. ALSAC was started by Danny Thomas and its
total endowment has grown to $2.4 billion. Annual fundraising has
increased every year through the current depressed economic environment
with unrestricted contributions and support of $797 million in fiscal
2012 (June 30 year end).
OVERALL STRONG FINANCIAL PROFILE: St. Jude/ALSAC's financial profile is
characterized by very strong liquidity and low debt burden with 695 days
cash on hand, 6.8x unrestricted cash to debt, and 14x debt service
coverage in fiscal 2012.
CREDIT PROFILE
The rating affirmation reflects St. Jude's
reputation and brand recognition, which has led to strong fundraising
activity by ALSAC. The bylaws of ALSAC require that all funds raised
(except for funds required for operations and restricted by donor) be
distributed to or be held for the exclusive benefit of St. Jude.
ALSAC has had very strong fundraising success, raising $691.9 million in
fiscal 2010, $735.2 million in fiscal 2011, and $813.6 million in fiscal
2012. The target for fiscal 2013 is $832 million. The vast majority of
donors are individuals through its national direct marketing efforts
(television and mail). ALSAC's fundraising goal is to increase the
amount raised 3%-5% every year over the next five years.
St. Jude and ALSAC are integral to each other's success and strategic
planning is done jointly. ALSAC sets an annual fundraising target every
year based on the hospital's projected need. In 2012, ALSAC provided
approximately 69% of St. Jude's $640.2 million total revenue. St. Jude's
and ALSAC's totalcombined unrestricted revenue in fiscal 2012 was $979
million and included $797 million of contributions and bequests, $96
million of net patient revenue, and $95 million in research grants. The
remaining revenue sources include net investment losses and other
revenue.
St. Jude/ALSAC's financial profile is strong with ample coverage and
cushion provided by its financial resources relative to debt and
operations. ALSAC had $2.4 billion in total investments as of Dec. 31
2012, which was invested in 35.6% equities, 24.6% hedge funds, 7.6%
private investments, 15.9% real assets, 1.6% multi asset managers and
14.7% cash and fixed income. The portfolio is diverse and ALSAC has not
changed its investment policy. The liquidity of the portfolio is also
good with over 50% available within three months, 77% within six months
and 80% within one year.
The Stable Outlook reflects the expectation that St. Jude/ALSAC will
continue to produce excellent financial results as the result of its
strong fundraising abilities.
St. Jude conducts research and treatment for childhood cancers and
diseases and treats patients regardless of their ability to pay. The
hospital provides inpatient and outpatient services to approximately
5,700 active patients every year. Patients are accepted based on their
eligibility to enroll in clinical research protocols. St. Jude has
entered into the second phase of its pediatric genome project in
conjunction with Washington University School of Medicine in St. Louis
to decode the genomes of more than 600 childhood cancer patients. There
are no other major capital projects on the horizon beyond what is
currently under construction. Tower II, which will replace St. Jude's
intensive care unit and operating rooms is expected to be complete in
fiscal 2014. St. Jude will also add proton beam therapy by fiscal 2016.
The cost of these projects total approximately $200 million. There are
no additional debt plans.
St. Jude is a 78-licensed bed pediatric specialty hospital and research
organization (with associated outpatient clinics and other facilities).
St. Jude is located in Memphis, Tennessee and is the only NCI designated
cancer center devoted solely to children. St. Jude/ALSAC posts its
audited annual financial statements and unaudited quarterly financial
statements to the Nationally Recognized Municipal Securities Information
Repositories.
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:
'Revenue-Supported Rating
Criteria', dated June 12, 2012
'Nonprofit Institutions Rating
Criteria', dated June 15, 2012
'Fitch Upgrades St. Jude Children's
Research Hospital's (Tennessee) Bonds to 'AAA'' , dated Feb 14, 2011
Applicable Criteria and Related Research:
Revenue-Supported Rating
Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm rpt_id=681015
Nonprofit
Institutions Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm rpt_id=681169
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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'.
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