OREANDA-NEWS. Fitch Ratings has assigned 'AA' ratings to the various series 2015 bonds issued by or on behalf of Trinity Health Credit Group (Trinity; formerly CHE Trinity) listed below:

--\$640.2 million Michigan Finance Authority Hospital revenue bonds (Trinity Health Credit Group) series 2015MI;

--\$151 million Montgomery County, Maryland revenue bonds (Trinity Health Credit Group) series 2015MD;

--\$169.6 million Idaho Health Facilities Authority Hospital revenue bonds (Trinity Health Credit Group) series 2015ID

--\$100 million Michigan Finance Authority variable rate bonds series 2015;

--\$350 million taxable Bonds, Series 2015

The Rating Outlook is Stable.

The series 2015 bonds are expected to be structured as traditional fixed-rate, variable-rate, and taxable debt and will be priced the weeks of Feb. 2 and Feb. 16, 2015 through negotiated sale. Bond proceeds will be used for refunding of certain maturities of currently outstanding debt, reimbursement of approximately \$251 million for prior capital expenditures, provide \$260 million for the redemption of outstanding commercial paper, fund approximately \$347 million in new money for various capital needs, and pay associated costs of issuance.

In addition, Fitch affirms the 'AA' rating on Trinity's currently outstanding \$4.8 billion of long-term debt.

SECURITY

The series 2015 bonds are general unsecured obligations of the Trinity Health Credit Group. The master indenture provides for security interests in 'pledged property' of members at the obligated group and certain designated affiliates with pledged property including: all receipts, revenues, income and other moneys received, and including rights to receive accounts and health care insurance receivables.

KEY RATING DRIVERS

GEOGRAPHICALLY DIVERSE SYSTEM: Trinity Health Credit Group (formerly CHE Trinity) is the second largest nonprofit healthcare provider in the U.S. with approximately \$13.6 billion in total revenue owned and operating 59 hospitals in 21 states with more than 89,000 FTEs. Fitch views the system's size, scope of operations, and geographic dispersion as a primary credit strength that helps protect the organization from adverse economic events that could severely affect any of its core markets.

STRONG MANAGEMENT PRACTICES: Fitch views Trinity's management team as a primary credit strength. The team's strong management practices are evident through continued improved revenue collection efforts, consolidation of duplicate services, and a willingness to close or divest in poor performing markets.

GOOD PROFITABILITY: As of June 30, 2014 (year-end consolidated; audited), Trinity earned nearly \$382 million from operations, which translated into 2.8% operating margin and 9.2% operating EBITDA margin. Fitch believes the system's profitability continues to be sufficient to generate adequate pro forma debt service coverage metrics for the 'AA' rating level.

MODERATE DEBT BURDEN: Pro forma maximum annual debt service (MADS) of approximately \$322 million represented 2.4% of fiscal 2014 revenues, which is consistent with Fitch's 'AA' category median of 2.6%.

ADEQUATE LIQUIDITY: Trinity had sound balance sheet indicators at fiscal year- end 2014 (year end June 30) with approximately \$7.3 billion in pro forma unrestricted cash and investments, which equated to 212.5 days cash on hand, 22.6x cushion ratio, and 130.5% cash to debt. Additionally, Fitch views the system's absolute liquidity growth favorably.

RATING SENSITIVITIES

LARGE CAPITAL PLANS: Over the next three years management has a large spending plan approaching 200% of annual depreciation which includes major facility renovations, information technology, and routine capital spending. Fitch expects Trinity to maintain its existing financial profile as it embarks on its strategic capital spending plans.

CREDIT PROFILE

Trinity is one of the largest Catholic health care delivery systems in the U.S. With operations in 21 states with 59 owned and operated hospitals, 115 continuing care facilities and home health and hospice programs providing nearly 1.7 million home health visits annually. The organization has total revenues of approximately \$13.6 billion employing more than 89,000 FTE's including 3,300 physicians.

As of June 30, 2014 (audited year-end) Trinity operated acute care hospitals, long-term care facilities, skilled nursing and behavioral health facilities with an aggregate of 10,600 staffed beds, 3,400 skilled nursing beds, and more than 1,000 assisted living units. Combined, the obligated group makes up approximately 79.4% of net revenues of the consolidated system.

The credit factors supporting Trinity's 'AA' rating include the benefits that accrue from the size and scale of the system's operations, a solid overall financial profile, and effective management practices. Trinity's geographic diversity of its operations, providing care in 21 states, allows the organization to realize economies of scale through on-going consolidation of certain shared administrative and financial services, as well as the ability to export clinical and operational 'best practices' across the system. Fitch believes that the system can generate further clinical and operational efficiencies throughout the system over the medium term, which should offset the effects of tighter reimbursement and pockets of sluggish volume growth.

SOLID FINANCIAL PROFILE

In fiscal 2014 Trinity generated \$382 million of income from operations, which equated to a 2.8% operating margin and a 9.2% operating EBITDA margin. These metrics, while lower, are consistent with Fitch's 'AA' medians of 3.9% and 11%, respectively. Fitch views favorably Trinity's ability to consistently generate solid operating profits despite heavy capital investment throughout the system on an annual basis. Going forward, management plans to produce similar operating margins, which should enable further balance sheet growth and satisfactory levels of debt service coverage.

At June 30, 2014 Trinity unrestricted pro forma cash and investments was approximately \$7.3 billion, which translated into 212.5 days cash on hand, 22.6x pro forma cushion ratio, and 130.5% pro forma cash to debt. Despite the organization's liquidity metrics being below Fitch's 'AA' category medians, absolute liquidity growth is a credit strength as unrestricted liquidity improved by nearly \$560 million from fiscal 2013 to fiscal 2014 (pro forma).

Pro forma MADS of \$322 million represented 2.4% of fiscal 2014 revenues, which is consistent with the 'AA' category median of 2.6% reflecting a moderate overall debt burden. Coverage of pro forma MADS by EBITDA was a solid 5.5x and 3.9x by operating EBITDA, which is consistent with the respective 'AA' category medians of 5.4x and 4.4x.

ENHANCED CAPITAL SPENDING PROGRAM

Over the next three years Trinity anticipates funding a total of \$4.5 billion for its capital investment program, which will be funded from a combination of operational cash flow, investment earnings, and an additional \$800 million of debt. Specific uses of these funds will go towards routine maintenance of the organization's various facilities, certain major facility replacement and expansion projects, and further investment in Trinity's information systems. Additionally, Trinity expects to fund at least \$300 million on capital projects for Loyola University Health System through fiscal 2018.

Fitch expects Trinity to maintain its current financial profile (i.e. liquidity, profitability and leverage) as it invests in its facilities and strategies.