TAMPA, Fla. - (Business Wire) Fitch Ratings has affirmed the North Carolina Medical Care Commission's approximately $29.4 million series 2006A&B revenue bonds, issued on behalf of The Pines at Davidson (The Pines), at 'A-'. The Rating Outlook is Stable.
The 'A-' rating reflects The Pines' strong liquidity position of over 745 days cash on hand as of March 31, 2008 (unaudited), attractive physical plant, good competitive environment, sound operating performance that has led to solid historic pro-forma debt service coverage of 4.1 times (x), favorable service area demographics and strong demand characteristics. The Pines has consistently had occupancy rates in the mid to high 90% in both independent living and health center over the past several years. Strong occupancy has resulted in solid profitability and sound debt service coverage that has consistently been over 2x on a historic pro-forma basis. In fiscal 2007, The Pines had solid all-in pro-forma debt service coverage of 2.6x.
The Pines completed construction of its 24 independent living units (ILUs), 10 assisted living units (ALUs), and four skilled nursing beds (SNFs) in the first quarter of fiscal year 2008. Illustrating strong demand for the new units, management indicated that 23 of the 24 new ILUs were occupied just two months after construction completion.
Credit concerns remain The Pines' low revenue only coverage and general uncertainty in the U.S. housing market. For the year ended Dec. 31, 2007, The Pines had revenue coverage of 1.1x, which is above Fitch's 2007 'Type B' continuing care retirement community (CCRC) category median of 0.8x. Through the March 31, 2008 interim period revenue only coverage was a low 0.4x. Although management did not indicate any specific deterioration to the local housing market in Davidson, Fitch remains watchful of the current housing conditions in the service area, which can affect demand and utilization trends at The Pines.
The Stable Outlook reflects Fitch's expectation that The Pines will maintain its excellent liquidity position and sound operating performance. Fitch expects utilization trends to be consistent with historical figures. Fitch views The Pines' disclosure practices favorably. In addition, disclosure practices required by the state of North Carolina Department of Insurance far exceed industry standards and are viewed favorably by Fitch.
The Pines is located in Davidson, North Carolina, which is approximately 20 miles north of Charlotte. The Pines is a type-B CCRC and consists of 225 ILUs, 30 ALUs, and 51 SNFs. In fiscal year ended Dec. 31, 2007, The Pines had total revenues of approximately $14.4 million.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
Fitch Ratings
Jim Mitchell, 813-222-1395 (Tampa)
Michael Burger, 212-908-0555 (New York)
Christopher Kimble, 212-908-0226 (Media Relations,
New York)
