The Rating Outlook is Stable.
The bonds are secured by a pledge of the Nation's full faith and credit, limited to the extent of its available assets. The bonds are also secured by and primarily payable from gross third-party revenues (
The Nation granted a limited waiver of sovereign immunity in conjunction with the issuance of the bonds. The Nation has agreed to submit to jurisdiction of federal and state courts, and in addition agrees that any claim or controversy related to the 2006 bond documents may be resolved by arbitration.
KEY RATING DRIVERS
CONTINUED STRONG FINANCIAL OPERATIONS: The upgrade reflects the continued strong performance of the Nation's financial operations, including both its casino gaming enterprise (
SOLID ENTERPRISE POSITION: CNB maintains a competitive position in the
AMPLE DEBT SERVICE COVERAGE; HEALTHCARE ESSENTIALITY: The continued growth in the pledged third-party health care revenues has led to positive operating margins and ample debt service coverage on the bonds. Health care services are essential to the Nation's members.
SOUND GENERAL FUND RESOURCES: The Nation maintains a sound general fund cushion which it has begun to draw upon to fund enhanced service levels and one-time capital investments.
RELATIVE REVENUE DIVERSITY: The Nation maintains relative revenue diversity compared to other gaming tribes. General fund operations receive support from non-gaming sources for about half of general fund spending.
TIGHT LEGAL STRUCTURE: Legal protections are solid and include a daily sweep of the pledged health system revenues to a trustee-held bond fund account. Funds in excess of the monthly requirement are transferred back to the Nation for legally available purposes.
SHIFT IN HEALTH SYSTEM PERFORMANCE: A shift in the currently strong performance of the health system and/or declines in the pledged third-party revenues could influence the rating.
MATERIAL CHANGE IN GAMING ENTERPRISE PERFORMANCE: Strong performance at the gaming enterprise is the key driver of the Nation's overall stable financial profile. Any material deterioration in finances, although not expected by Fitch, would put negative pressure on the rating.
The Nation is the second largest federally recognized tribe with approximately 305,000 enrolled members. The Nation is headquartered in
STRONG GAMING PERFORMANCE IS A KEY CREDIT POSITIVE
Gaming revenues are the largest source of general fund income supporting tribal operations. Fitch considers this income stream to be relatively stable despite the discretionary nature of gaming and the competitive market in which the Nation's casinos operate. The Nation owns eight casinos and continues to reinvest in its facilities.
The Nation's flagship property is the Hard Rock Casino & Resort Tulsa. The Nation continues to invest in this property, adding additional slots and gaming space following a roof-collapse in 2011, as well as a third-hotel tower that opened in
CNB has no material debt outstanding and a strong liquidity position of
STABLE AND ESSENTIAL HEALTHCARE OPERATIONS HAVE BECOME A KEY CREDIT STRENGTH
The Nation's health care system serves an eligible patient population of approximately 130,000 within its 14-county jurisdictional area. The health care system includes nine clinics, as well as
Primary care visits have steadily increased to 444,000 in fiscal 2013, up from approximately 345,000 in fiscal 2009, while the payer mix has remained stable. The recently opened clinic in
IHS funding, the primary source of revenue for healthcare operations, was
Additional capital plans of for the Nation's health system include are estimated at about
CONTINUED GROWTH IN PLEDGED THIRD-PARTY HEALTH REVENUES
The bonds are secured by the Nation's full faith and credit as well as gross third-party revenues to the health system. The bonds require annual level sinking fund payments of
GOVERNMENTAL OPERATIONS SUPPORTED BY GAMING
General fund operations are funded primarily by a dividend paid from the net income of CNB. The dividend payout rate is governed by tribal policy which sets the floor at 35% of CNB's net income; the payout rate was increased from 30% in fiscal 2012. The dividend has historically made up between 40% and 50% of general fund revenues but increased to 60% in fiscal 2012 as a result of the higher payout rate and a non-recurring dividend appropriation for capital outlays. Additional revenue diversity is provided by the collection of taxes on motor fuels, tobacco, and motor vehicles. General fund revenues increased by 8.1% annually compounded rate (fiscal years 2008 - 2012) as a result of the strong gaming income performance and stable tax collections.
General fund expenditures support government operations including health, education and other quality of life services. Spending has also been fairly stable but ramped up significantly in fiscal years 2012 and 2013 by 7% and 23% (unaudited), respectively, particularly in the areas of health and education services and one-time capital outlays. The general fund posted a very large surplus of
Unrestricted fund balance is projected to decline in fiscal 2013 to
The fiscal 2014 general fund budget calls for a reduced level of transfers and one-time capital outlays. Management expects to maintain total fund balance at or above
Additional information is available at 'www.fitchratings.com'.
In addition to the sources of information identified in Fitch's Tax-Supported Rating Criteria, this action was additionally informed by information from Creditscope,
--'Tax-Supported Rating Criteria' (
--'U.S. Local Government Tax-Supported Rating Criteria' (
--Corporate Rating Methodology (
--U.S. Nonprofit Hospitals and Health Systems Rating Criteria (
Tax-Supported Rating Criteria
U.S. Local Government Tax-Supported Rating Criteria
Corporate Rating Methodology - Effective from
U.S. Nonprofit Hospitals and Health Systems Rating Criteria
Dmitry Feofilaktov, +1-212-908-0345
Source: Fitch Ratings
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