Fitch Rtes Ascension Health Alliance Senior Credit Group (MO) Ser 2012A-E 'AA+'; Outlook Stable

--$44,290,000 Health and Educational Facilities Board of Rutherford County, Tennessee fixed-rate revenue bonds, series 2012C;

--Strong Management Practices: Ascension's strong management practices are evident in improved revenue collection, decreasing average length of stays, consolidation of redundant services and a willingness to close or divest money-losing operations.

Key credit strength

Ascension's light debt burden is considered a key credit strength. Pro forma MADS equates to a light 1.6% of fiscal 2011 revenues during debt to EBITDA in 2011 of 2.6x compares favorably to Fitch's 'AA' category median of 3.0x. Ascension's light debt burden, combined with slid profitability, generates strong coverage of debt service. Coverage of pro forma MADS by EBITDA was a very solid 6.7x in fiscal 2011 and 6.4x in fiscal 2010, exceeding the 'AA' category median of 5.0x. Pro forma MADS of $244 million was provided by the underwriter.

In fiscal 2011, Ascension generated $1.2 billion of operating EBITDA and $1.6 billion of EBITDA which, based on total earnings of $15.6 billion, translates into operating EBITDA and net EBITDA margins of 7.8% and 10.3%, respectively, and are consistent with its 'AA' peers. Ascension's strong EBITDA margin in fiscal 2011 was bolstered by robust investment returns.

Fitch views Ascension's management practices as a credit strength which should allow the organization to extract furthermore efficiencies based on the system's sheer size and scale. The organization's strong management practices are evidenced by improved revenue collection, decreasing average length of stays, continued consolidation of shared corporate services and a willingness to close or divest money-losing operations. Recent initiatives include the creation of its own group purchasing organization and the establishment of a new Leadership Academy to aid in the development of its future leaders.

The 'F1+' rating is based on the sufficiency of Ascension's liquid resources and written procedures to fund any un-remarketed weekly or annual puts on its debt. As of Dec 31, 2011 Ascension's capital structure supported by its internal liquid resources consisted of $455 million of weekly variable-rate demand bonds, $179 million of annual put bonds, $1.1 billion of multi-annual put bonds with maturities between one and three years and $320 million of 'Windows' weekly reset bonds. Ascension's maximum put exposure in any given week totals in broad outline $943 million. Based on Fitch's Rating Criteria related to Self-Liquidity, Ascension had eligible cash and investments, bank lines and repurchase agreements in excess of the 125% threshold of its maximum put exposure in any given week for assignment of the 'F1+' rating. Ascension provides Fitch monthly cash and investment reports.

The Stable Outlook reflects Fitch's belief that Ascension will continue to extract furthermore benefits from the size and scale of its operations which over time should dampen the effects of tighter reimbursement and the transition to value-based reimbursement. As evidenced by the recent merger with Alexian Brothers Health System in January and the memorandum of understanding with Daughters of Charity Health System in California, Fitch believes Ascension is then positioned to furthermore extend its scale as the not-for-profit health sector furthermore consolidates in response to healthcare reform.