Harris County Hospital District is planning to issue $104 million of senior-lien refunding bonds this week in variable-rate mode with a letter of credit from JPMorgan Chase. The tax-exempt bonds will retire Series 2007B auction-rate bonds that were converted to taxable debt in April 2008.

The new bonds carry underlying ratings of A from Standard & Poor’s and Fitch Ratings with stable outlooks.

The 2010 bonds are expected to carry AAA ratings based on the credit strength of JPMorgan, analysts said.

The Hospital District has a population of more than 3.9 million and includes the Houston metropolitan area. It provides acute, emergency, trauma, and outpatient primary-care services, and is the county’s safety-net provider for indigent and low-income patients. In fiscal 2010, the last full fiscal year, the district relied on county tax revenue for about 37% of its total annual revenues, analysts noted.

“The stable outlook reflects our current comfort level with HCHD’s modest leverage, strong liquidity, and other robust, solid balance-sheet metrics, all of which mitigate the pace at which operating trends have weakened over the past few years,” Standard & Poor’s analysts wrote. “Uncertainty surrounding the financial impact of health reform on the district and weaker operating performance before adjustment for tax revenues likely preclude a raised rating over the outlook period.”

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