The Rating Outlook is Stable.
The bonds are secured by a pledge of the Nation's full faith and credit, limited to the net available assets of the government, and pledged health system revenues (
The Nation granted a limited waiver of sovereign immunity in conjunction with the bonds. The Nation has agreed to submit to jurisdiction of federal and state courts and that any claim or controversy related to the series 2007 bonds 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 and health system.
SOLID ENTERPRISE POSITION: The gaming enterprise enjoys a solid position in the competitive
AMPLE DEBT SERVICE COVERAGE; HEALTHCARE ESSENTIALITY: Debt service coverage has climbed significantly from the time of initial issuance due to growth in the pledged third-party health revenues and aggressive early debt retirement. Operating performance of this essential service has been stable due to continued increases in
ROBUST GOVERNMENTAL BALANCES: The Nation's general fund has accumulated very high fund and cash balances over the past few years due to the increased amount of gaming fund transfers. The Nation has a practice of maintaining general fund cash balances equal to at least one-year of budgeted spending.
TIGHT LEGAL SAFEGUARDS/EXCESS COVENANT RESERVES: Solid legal protections include a daily sweep of pledged revenues to a trustee-held lock-box and multiple liquidity reserve requirements, all of which the Nation exceeds.
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.
REVENUE CONCENTRATION: As the gaming enterprise fully supports the Nation's services, any material decline in enterprise performance would have an adverse effect on the rating.
The Nation is governed by a tri-partite constitutional governmental structure. The current governor is in his seventh consecutive term and is not term limited.
STRONG GAMING REVENUE GROWTH; TX LEGALIZATION OVERHANG REMAINS
Gaming revenues are the Nation's largest revenue source. The majority are derived from the Nation's flagship casino facility, the
The Nation's gaming enterprise operating trends are strong, with stable EBITDA margins at between 40%-45% from fiscal years 2010 to 2013. The stability is partly supported by the Nation's considerable reinvestment in its facilities and improved operations of its 16 different gaming facilities. Liquidity of the gaming operations is also strong, with
An ongoing risk to operations is the possibility of gaming legalization in TX, given the location of the Nation's
The Nation continues its diversification efforts by investing in its smaller facilities and by seeking gaming opportunities outside the Nation's boundaries through GGS, which also owns
ESSENTIAL SERVICE AND STABLE PERFORMANCE OF HEALTH SERVICES
The Nation's IHS user population totaled approximately 36,000 in 2013 and the health system also serves a large number of non-Chickasaw Native Americans from other areas. To accommodate the growing population the Nation opened its
Healthcare operations exhibited continued stability in 2013, due mainly to significant growth in the third-party health revenues, which include
The Nation's health care operations produced an operating surplus of
SWEEP OF PLEDGED REVENUES; EXCESS COVENANT RESERVES
Pledged health system revenues are swept daily, or when first received, to the trustee-held bond fund account. The bonds are secured both by the Nation's full faith and credit and the third-party revenues, which have experienced good growth. Third-party revenues increased to
Additional legal provisions include a liquidity covenant whereby the Nation must maintain
GOVERNMENTAL OPERATIONS REMAIN STRONG
Transfers from the gaming enterprise represent an extremely concentrated 90% of general fund revenues. The amount of the annual gaming transfers is determined annually by the legislature as part of the Nation's budget process rather than by a set, formal transfer rate. The gaming transfers increased by a 10.8% compounded annual average from fiscal years 2009-2012 and increased another 6% in fiscal 2013 (unaudited). The Nation has increased governmental spending in conjunction with the higher gaming transfers to support enhanced services for health, education, family, and housing. Even with the increased spending the Nation has posted very large operating margins in four of the past five fiscal years, with a net deficit in fiscal 2010 corresponding with costs associated with capital investments.
The Nation has a prudent policy of maintaining at least 100% of the upcoming budget in cash, which provides for a robust fiscal cushion against potential swings in gaming revenue and federal budget actions affecting grant income. The general fund concluded fiscal 2012 with a very large unrestricted fund balance of
The fiscal 2013 audit is in progress (
The fiscal 2014 budget increased spending by 10.8% (
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
U.S. Nonprofit Hospitals and Health Systems Rating Criteria
Corporate Rating Methodology: Including Short-Term Ratings and Parent and Subsidiary Linkage
Tax-Supported Rating Criteria
U.S. Local Government Tax-Supported Rating Criteria
Dmitry Feofilaktov, +1-212-908-0345
Source: Fitch Ratings
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