Fitch to Confirm AZ Health Facil Auth VRDBs, Ser 2008E (Banner Health) at 'AA+/F1+'

NEW YORK--(BUSINESS WIRE)-- On the effective date of Oct. 5, 2010, Fitch Ratings will confirm the long-term and short-term 'AA+/F1+' ratings assigned to the $124,195,000 Arizona Health Facilities Authority revenue bonds series 2008E (Banner Health; $122,160,000 currently outstanding).

The rating action is in connection with the substitution of the irrevocable direct-pay letter of credit (LOC) previously provided by Landesbank Baden Wurttemberg with a substitute LOC issued by Bank of America, NA (rated 'A+/F1+', Outlook Stable by Fitch). A mandatory tender will occur on the substitution date of Oct. 5, 2010.

The long-term rating will continue to be determined using Fitch's dual-party pay criteria and will be based jointly on the underlying rating assigned to those bonds by Fitch (currently rated 'AA-'), and the support provided by the substitute LOC. The short-term 'F1+' rating will be based solely on the LOC. For information about the underlying credit rating see press release dated June 29, 2009 available at 'www.fitchratings.com'.

Fitch's dual-party pay criteria consider the likelihood of the failure of both a rated obligor and a bank LOC provider. The methodology results in a long-term rating that is up to two notches higher than the stronger of the two credits if the following conditions are met: (1) both entities have a rating of 'A' or higher; (2) the transaction is structured such that payments from both the municipal issuer and the bank are in the flow of funds and both entities would have to fail to perform before the bonds defaulted; and (3) the credit of the bank and the rated obligor have no more than a medium degree of correlation. Fitch has determined a low degree of correlation between Bank of America, NA, and the obligor which results in a rating of 'AA+' for the bonds. If either the underlying bond rating or the bank rating were downgraded to 'A-' or lower, the dual-party pay criteria could no longer be applied, and the long term rating assigned to the bonds would then be adjusted to the higher of the bank rating and the underlying bond rating.

Pursuant to the substitute LOC, the bank is obligated to make payments of principal and interest on the bonds upon maturity, acceleration and redemption, as well as purchase price for tendered bonds. The rating will expire upon the earliest of: (a) Oct. 2, 2015, the initial stated expiration date of the substitute LOC, unless such date is extended; (b) conversion to any interest rate mode other the daily or weekly rate; (c) any prior termination of the substitute LOC; and (d) defeasance of the bonds. The substitute LOC provides full and sufficient coverage of principal, plus an amount equal to 45 days of interest at a maximum rate of 12% based on a year of 365 days, and purchase price for tendered bonds, while in the daily and weekly rate modes. The remarketing agent for the bonds will be Merrill Lynch, Pierce, Fenner & Smith Incorporated.

Additional information is available at www.fitchratings.com.

Applicable Criteria and Related Research:

--'U.S Municipal Structured Finance Rating Criteria', Aug. 16, 2010;
--'Rating Guidelines for Letter of Credit-Supported Bonds', April 29, 2009.

Applicable Criteria and Related Research:
Rating Guidelines for Letter of Credit-Supported Bonds
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=435132
U.S. Municipal Structured Finance Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=548588

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 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.



CONTACT:

Fitch Ratings
Primary Analyst
Joseph Staffa, +1-212-908-0829
Senior Director
One State Street Plaza
New York, NY 10004
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Secondary Analyst
Michael Borgani, +1-415-732-5620
Director
or
Committee Chairperson:
Trudy Zibit, +1-212-908-0689
Managing Director
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Media Relations:
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[email protected]

KEYWORDS:   United States  North America  Arizona  New York

INDUSTRY KEYWORDS:   Health  Hospitals  Professional Services  Finance

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