S&P Rates Washington Hlth Care Fac Auth Revs A+ SPUR

Primary Credit Analysts: Cynthia S Keller, New York, (1) 212-438-2035; cynthia.keller@spglobal.com Lisa Zuckerman, San Francisco, (1) 415-765-5036 NY -- Standard&Poor's CreditWire 10/16/98 – Standard&Poor's today assigned its single-'A'-plus underlying rating (SPUR) to Washington Health Care Facilities Authority's $58.63 million revenue bonds series 1998 dated Nov. 1, 1998 due Nov. 1, 2028, issued for Peace Health. The bonds are scheduled to sell Oct. 21, 1998 and expected to receive a triple-'A' rating based on bond insurance. The rating reflects solid and improving finances driven by strong business positions in four diversified West Coast markets and management's willingness to make changes necessary for the organization's future viability. Standard&Poor's analysis focuses on the entire Peace Health system,

...depreciation rose during the same period. This decline is largely due to three years of losses, totaling $20 million from Peace Health's Select Care HMO. This HMO was sold to Sisters of Providence in December 1997 and future profitability should improve substantially. Net income has been extremely stable -- bolstered in 1996 and 1997 by strong investment markets, profits have ranged from $18 million to $26 million. Pro forma coverage is 3.5 times based on 1997's net income margin of 3.4% and the debt burden is light at 3%. Unaudited 1998 results are expected to substantially exceed 1997 figures, with obligated group operating and net income of $18.7 million and $28 million, respectively. The balance sheet is solid, with $197 million cash equal to 113 days' cash on hand. Pro forma cash to debt will be about 85%. Peace Health strives to keep debt as a percent of capitalization under 37% and may borrow another $45 million by 2001. Postissuance debt as a percent of capitalization is 41% based...

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