OREANDA-NEWS. Fitch Ratings has assigned a 'BBB-' rating to the following bonds issued by Mesquite Health Facilities Development Corporation, TX on behalf of Christian Care Centers (Christian Care):

--$27.08 million series 2016 fixed-rate bonds.

Bond proceeds will refund Christian Care's series 2005 bonds, fund a debt service reserve account and pay a portion of issuance costs. The bonds are scheduled to sell via negotiated sale during the week of Feb. 15, 2016.

In addition, Fitch affirms the 'BBB-' rating on the following bonds issued by Mesquite Health Facilities Development Corporation on behalf of Christian Care:

--$30.65 million series 2014 fixed-rate bonds;
--$29.19 million series 2005 fixed-rate bonds.

The Rating Outlook is Stable.

SECURITY
The bonds are secured by a gross revenue pledge, mortgage liens on Christian Care's property, and debt service reserve funds.

KEY RATING DRIVERS

FAVORABLE OCCUPANCY TRENDS: Due to its desirable locations, religious affiliation, and reputation for quality care, Christian Care maintains strong occupancy in all levels of service. Independent living unit (ILU), assisted living unit (ALU) and skilled nursing facility (SNF) occupancies averaged 90%, 90.4%, and 91.2%, respectively from fiscal year 2011 to fiscal year 2014. Total system wide occupancy improved to 92% in fiscal year 2014, from 88.4% three years earlier. For the first 11 months of fiscal year 2015, total system wide occupancy averaged 90.8%.

ADEQUATE FINANCIAL PERFORMANCE: Christian Care enjoys a history of solid, but modestly declining financial performance and also benefits from a long history of fundraising. While the operating ratio ticked up to 95.7% in fiscal year 2014 and 96.1% for the Nov. 30, 2015 interim period, it remains in line with Fitch's 96.1% 'BBB' category median.

INCREASED BUT MANAGEABLE DEBT POSITION: Despite a $20 million net increase in long-term debt during 2014, Christian Care's debt position is manageable for the rating category. Maximum annual debt service (MADS) was 10.7% of revenues in fiscal year 2014 and 9.4% for the 11 month period ending Nov. 30, 2015. In addition, Christian Care's solid historical cash flow produced 1.9x MADS coverage in 2014 and 1.4x MADS coverage for the interim fiscal 2015 period. However, future capital projects that result in the issuance of additional borrowings could pressure debt metrics.

MODEST LIQUIDITY METRICS: Unrestricted cash and investments declined modestly over the past year due to higher capital spending and amounted to 209 days operating expenses or 37.8% of debt as of Nov. 30, 2015. Even though these levels are below the 'BBB' category medians, Fitch believes these amounts are adequate since most of Christian Care's ILU residency agreements are rental contracts and fee-for-service arrangements.

REDUCED GOVERMENTAL PAYOR EXPOSURE: With the closure of a stand-alone skilled nursing facility in early 2013, Christian Care lowered its exposure to governmental payors to about 30% of resident service revenue for the 11 month period ending Nov. 30, 2015, from 37% in fiscal 2012. Furthermore, its new campus in Allen, TX that was financed with the series 2014 bond proceeds is planned to be entirely private pay, which is expected to continue reducing its reliance on the more restrictive governmental reimbursement programs.

RATING SENSITIVITIES

NO DEBT CAPACITY AT CURRENT RATING: As a result a new money bond issue in 2014 and its corresponding effect on Christian Care Centers' capital-related metrics, Fitch believes that additional debt cannot be supported at the current rating level absent cash flow growth, financial resource improvement, and stabilized operations at the new campus project.

CAPITAL PROJECT MANAGEMENT: Construction and fill-up risks from Christian Care Centers' new campus project in Allen, TX could potentially cause negative rating pressure due to costs overruns, higher than expected start-up expenses, and occupancy levels that lag projections.

CREDIT PROFILE

Located in the Dallas-Ft. Worth Metroplex, Christian Care consists of two senior living campuses, with a total of 386 ILUs, 138 ALUs, and 223 SNF beds in Mesquite and Ft. Worth, TX. Total operating revenue in fiscal year 2014 was $34.7 million. During September 2014, Christian Care embarked on the construction of a new campus in Allen, TX that will include 22 cottage ILUs with rental agreements and 68 ALUs that is now scheduled to open in May 2016.

MANAGEABLE DEBT POSITION

Despite the debt increase for the Allen, TX expansion project, Christian Care's adequate historical cash flow produced MADS coverage of 1.9x in fiscal 2014 and 1.4x for the 11 month interim fiscal 2015 period. These figures exclude any potential revenue and operating expenses from the 22 ILUs and 68 ALUs at the new Allen, TX campus. Leverage is moderately high with adjusted debt to capital at 74.2% in fiscal year 2014, which is above Fitch's 58.8% 'BBB' category median. Debt to net available of 8.1x is unfavorably above the 'BBB' category median of 6.3x in fiscal year 2014 as well.

CONSTRUCTION PROJECT UPDATE

During September 2014, Christian Care began construction on its new campus in Allen, TX. During many periods of 2015, the Dallas area received substantial amounts of rain that caused flooding and resulted in project delays and some additional costs. It is expected that these extra costs are covered by contingency amounts. The project's marketing efforts are accelerating resulting in an increase in the number of potential residents awaiting completion of construction.

DISCLOSURE

Christian Care has covenanted to provide audited financial statements and an officer's certificate to the MSRB's EMMA system within 150 days of year end. Christian Care also provides quarterly unaudited statements and occupancy statistics to EMMA within 45 days of each quarter's end.