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El Camino Hospital, Calif., Upgraded to A1 by Moody's

Moody's Investors Service has upgraded to A1 from A2 El Camino Hospital's bond rating affecting $186.9 million of outstanding fixed and variable rate demand revenue bonds issued by Santa Clara County Financing Authority, Calif.

The outlook remains stable.

The El Camino Hospital District's Series 2006 general obligation bonds ($142.2 million outstanding) are rated Aa1 and are secured by the district's voter-approved unlimited property tax pledge.

Bondholders of the general obligation bonds do not have any recourse to the hospital for payments under the bonds. Tax revenues and payments related to the general obligation bonds have been excluded from this analysis.

The rating upgrade to A1 and maintenance of the stable outlook is based on ECH's fundamental strengths as a large, high-end tertiary provider with operations in a wealthy and demographically strong service area in Silicon Valley.

Over the past two and half years, ECH's balance sheet and operating performance and relative metrics have notably rebounded since tempering in FY 2010. ECH's balance sheet continues to strengthen with growth in unrestricted liquidity and with a relatively low revenue bond direct debt position.

Operating performance through six months of FY 2013 is on track for another year of improved and very strong operating profitability and cash flow generation that can be attributed to good volume and revenue growth.

Additionally, following a couple of years of instability and turnover in key management positions and under a newly developed and reenergized board, a permanent senior leadership team, and an engaged medical staff, ECH has outlined a renewed strategy focused on the triple aim of quality, service, and affordability with a focus on continuum of care, physician partnerships and other innovative business and community alliances.

The agency expects ECH to continue to produce strong operating cash flow given its favorable market presence and location and its continued focus on operating efficiencies, in order to support future capital plans, maintain solid liquidity and leverage measures and offset any future reimbursement declines and competitive pressures.

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