WNS WNS Holdings Limited

Fitch Ratings has placed the ratings of Health Care REIT (NYSE:HCN) on Rating Watch Positive following the company's announcement of its intention to acquire Windrose Medical Properties Trust (NYSE:WNS or Windrose). The following ratings are affected: -- Issuer default rating 'BBB-'; -- Unsecured bank credit facility 'BBB-'; -- Senior unsecured notes 'BBB-'; -- Preferred stock 'BB+'. The rating action affects approximately $1.5 billion of outstanding securities. Fitch notes that the acquisition would increase the company's asset base by approximately 25% and would broaden its investment portfolio to include medical office buildings, outpatient facilities and specialty hospitals. The Windrose properties are well-leased at 94.2% as of June 30, 2006. The addition of these facilities to the portfolio will decrease HCN's reliance on revenue from its top tenants. HCN's top five tenants represented 42% of its total investment balance as of June 30, 2006. Pro forma for the acquisition, HCN's top five tenants would represent 35%. Moreover, the acquisition would also reduce HCN's exposure to government reimbursement risk. Skilled nursing facilities, which generate the vast majority of revenue from government sources, would decline from 45% of HCN's total portfolio to 37% with the addition of the Windrose portfolio. Fitch also notes that HCN has indicated that it intends to maintain debt service coverage ratios and leverage within existing ranges after the closing of the acquisition. HCN's interest coverage as measured by recurring EBITDA over total interest expense was 3.2 times (x) for the last 12 months and fixed charge coverage after adjusting for capital expenditures and preferred dividends was 2.5x for the last 12 months. HCN's total debt to undepreciated book capital was 44.1% and total debt plus preferred securities to total undepreciated book capital was 52.4% at June 30, 2006. In addition to the company's solid operating performance, an important contributor to HCN's existing ratings is the company's relatively liquid balance sheet which is due in part to its unsecured funding strategy. As of June 30, 2006, HCN's portion of secured debt was 4% of total debt. After the closing of the acquisition, however, HCN's percentage of secured debt would rise to 13%. Fitch anticipates that the company would reduce this exposure meaningfully over the next several quarters. Fitch also notes that there is a moderate degree of execution risk associated with this acquisition. Although existing HCN management has limited expertise with respect to managing a platform of medical office buildings, the company will retain key executives from Windrose. Fitch would expect to see evidence of a smooth integration of Windrose into HCN prior to resolving the Rating Watch. Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.