OREANDA-NEWS. Fitch Ratings has affirmed the Hospital Centre of Roubaix (CH Roubaix)'s Long-term foreign and local currency Issuer Default Ratings (IDR) at 'A' with Stable Outlooks and Short-term foreign currency IDR at 'F1'.

KEY RATING DRIVERS
Fitch rates CH Roubaix on a top-down basis as it is classified as a credit-linked entity under its public-sector entity criteria. This is due to its status as a public hospital establishment (PHE), and its direct supervision of Nord-Pas-de-Calais Regional Health Agency (ARS NPC; a state body). CH of Roubaix is rated three notches below its sponsor (the French state; AA/Stable/F1+) as although it is an important hospital, it does not have the strategically significant status of a university hospital.

As a PHE, Fitch expects that CH of Roubaix would benefit from very strong state support in case of need. The French government does not explicitly guarantee CH of Roubaix's debt, but Fitch assumes that the state would have the willingness to provide timely support in case of need. By virtue of its status, CH of Roubaix's assets and liabilities cannot be liquidated or transferred to entities other than the French state.

Due to its integration in the general government accounts and the state's role in financing, Fitch considers that CH of Roubaix's integration is strong. Borrowings are subject to approval by the state if CH of Roubaix does not comply with certain budgetary ratios. Even if it is not subject to this approval at end-2015, Fitch believes that the state's financial supervision helps prevent potential budgetary tension. In view of the safeguards, the rating difference of three notches from the sponsor acts as a rating floor for CH of Roubaix.

The hospital is of strategic importance to the state for the provision of health care services in its territory. It represents the second-largest PHE for emergency patient admissions after the regional university hospital centre of Lille, and belongs to a regional group of hospitals, which allows optimal organisation of certain medical services.

Over the medium term, Fitch expects management to achieve its objective of a gross margin of 8.00% compared with 5.55% expected at end-2015. Fitch estimates that CH of Roubaix has some leeway, especially in bed management and coding of medical treatment. For 2015, although CH of Roubaix will post a negative net result of EUR0.8m, its self-financing capacity of EUR11.5m will remain sufficient to cover capital debt repayments of EUR3.2m.

CH of Roubaix is undertaking an important project with the construction of a mother and child unit and an intensive care unit on the same site. The project benefits from strong financial support from the state. Fitch considers that the project should reinforce the position of CH of Roubaix in its territory and should allow for some efficiency gains.

We expect long-term debt to reach at about EUR58m in 2018, representing 3.2 years of cash flow, which we consider acceptable. The increase will be mainly driven by the combined effect of lower co-financing of the project from the state and aid payments over a longer period. At end-2015, long-term debt will reach EUR44.4m (2014: EUR40.6m), representing 3.9 years of cash flow.

RATING SENSITIVITIES
A downgrade would most likely follow a downgrade of the sovereign rating.

An upgrade would most likely result from an upgrade of the sovereign or a change in CH of Roubaix's status to a regional university hospital, which Fitch considers unlikely at present.