Fitch Rates La Vida Llena's (NM) 2010 Rev Bonds 'BBB'; Outlook Stable

Fitch Ratings has assigned a 'BBB' rating to the following bonds issued on behalf of La Vida Llena (LVL):

-- $18,750,000 New Mexico Hospital Equipment Loan Council first mortgage revenue bonds (La Vida Llena Project), series 2010A;
-- $15,000,000 New Mexico Hospital Equipment Loan Council first mortgage revenue bonds (La Vida Llena Project), series 2010B;
-- $30,000,000 New Mexico Hospital Equipment Loan Council first mortgage revenue bonds (La Vida Llena Project), series 2010C.

The series 2010A bonds will be offered in a traditional fixed-rate mode, while series 2010B and 2010C bonds will be offered in a variable-rate mode and purchased by Compass Bank (rated 'A+/F1' by Fitch). The series 2010B bonds will be immediately paid by entrance fees associated with the Phase V project and series 2010C bonds will amortize over a 10-year period with a bullet maturity occurring in year 2020. At that time, LVL intends to either refinance or pay off the remaining series 2010C amount.

In addition, Fitch withdraws its 'BBB' implied general revenue bond rating on LVL.

The Rating Outlook is Stable.

RATING RATIONALE:

-- LVL has had a long history in the market; the organization became incorporated in the late 1970s and officially opened in 1983. Furthermore, LVL is the dominant provider, as it is the only continuing care retirement community (CCRC) and Type A life care provider in Albuquerque. Fitch views LVL's market position as a primary credit strength.
-- Fitch views LVL's strong history of high occupancy in its independent living units (ILUs) as a key credit strength, demonstrated by a 97% average over the past three fiscal years.
-- LVL has maintained a solid financial profile, which has resulted in sound liquidity growth and good historical pro forma debt service coverage.
-- The organization's small revenue base, which totaled $17.7 million in fiscal 2010 (unaudited), can potentially put LVL at risk if adverse economic events occur.

KEY RATING DRIVER(S):

-- Successful completion and occupancy of LVL's Phase V project.
-- Maintenance of financial profile that is consistent with historical trends.

SECURITY:

-- The bonds are secured by mortgage on land and buildings and gross revenues of the obligated group. Additionally, the series 2010A bonds will have a debt service reserve fund.

CREDIT SUMMARY:

La Vida Llena is a Type A CCRC located in Albuquerque, New Mexico. The facility consists of 282 independent living units (260 ILU apartments, 22 ILU casitas), 45 assisted living units, 44 skilled nursing beds, and 16 memory support units. In fiscal 2010, LVL had total revenues of $17.7 million.

The 'BBB' rating continues to be based on LVL's strong market position, high ILU occupancy as evidenced by occupancy rates in the upper 90% range, and solid historical financial performance. Fitch's main credit concerns include successful completion and occupancy of LVL's Phase V project and a relatively high pro forma debt burden. Over the past five fiscal years, LVL has demonstrated strong profitability that has helped support solid balance sheet metrics and pro forma debt service coverage. Since fiscal 2006, LVL has averaged an operating ratio of 98.9% and excess margin of 18.3%, which compare favorably against Fitch's 'BBB' median of 99.6% and 2.2%, respectively. Strong profitability has supported solid balance sheet growth illustrated by 446 days cash on hand, a 5.3 times (x) pro forma cushion ratio, and 60% cash to debt in fiscal 2010.

LVL's Phase V construction project consists of an expansion of 58 ILU apartments that is expected to begin in July of 2010 with construction completion occurring in 2011. The total project cost is approximately $27 million. As of May 2010, management stated there were 21 ILU pre-sales, which is consistent with management's fill-up goals.

For more information, please see the LVL research report dated Jan. 4, 2010 available on 'www.fitchratings.com'.

DISCLOSURE:

LVL has covenanted to provide financial information to the Municipal Securities Rulemaking Board's EMMA system.

Applicable criteria available on Fitch's website at 'www.fitchratings.com':

-- 'Rating Guidelines for Nonprofit Continuing Care Retirement Communities', December 15, 2008.
-- 'Revenue-Supported Rating Criteria', December 29, 2009.

Additional information is available at 'www.fitchratings.com'.

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