OREANDA-NEWS. Fitch Ratings maintains the Rating Watch Evolving on Wellmont Health System's (Wellmont) outstanding debt, which is listed at the end of the press release.

SECURITY
Debt payments are secured by a pledge of the gross revenues of the obligated group. A fully funded debt service fund and a liquidity covenant provide additional security.

KEY RATING DRIVERS
MERGER PROCEEDING: In April 2015, Fitch placed Wellmont's 'BBB+' rating on Rating Watch Evolving in response to the announcement that Wellmont and Mountain States Health Alliance (MSHA; rated 'BBB+', Rating Watch Evolving) had signed an agreement to explore a merger. The maintenance of the Rating Watch Evolving reflects the continuation of the merger process.

COPA SUBMITTED: The two organizations have jointly submitted Certificate of Public Advantage (COPA) applications to Tennessee and Virginia. The COPA applications are the official request to each of these states for approval of the merger. A public comment and consideration process is currently underway, which will last for 120 days in Tennessee and 150 days in Virginia. The timelines for the public comment periods officially start with the applications being declared complete by the states, which has yet to happen.

OPERATIONS REMAIN STEADY: Six month Dec. 31, 2015 results show a 1.4% operating margin, 2.6x coverage and 205 days cash on hand, which is consistent with the first six months of the prior fiscal year (FY) and the FY2015 (June 30 year end) audited results.

RATING SENSITIVITIES
COMPLETION OF PENDING TRANSACTION: Resolution of the Rating Watch will be tied to the completion of the merger process and the treatment of the debt of Wellmont Health System post-transaction.

CREDIT PROFILE
Wellmont is a large regional health care system with six acute hospitals (711 staffed beds) and other related entities located in northeastern TN and southwestern VA. Wellmont had approximately $812.7 million in total revenue in FY2015.

Outstanding Debt:
--$76,165,000 Health, Educational and Housing Facilities Board of the County of Sullivan, Tennessee Hospital Revenue Refunding Bonds (Wellmont Health System Project), Series 2011;
--$200,000,000 Health, Educational and Housing Facilities Board of the County of Sullivan, Tennessee Hospital Revenue Bonds, Series 2006C (Wellmont Health System Project);
--$55,000,000 Virginia Small Business Financing Authority Hospital Revenue Bonds, Series 2007A (Wellmont Health System Project).