Fitch Ratings takes the following action on Cherokee Nation, OK (the Nation) debt:

--$20.3 million Cherokee Nation, OK Health Care System bonds, series 2006 affirmed at 'BBB-'.

The Rating Outlook is Stable.

KEY RATING DRIVERS:

GAMING SUPPORTS STRONG GOVERNMENTAL OPERATIONS: The Nation is dependent upon the cash flows of the gaming operation to fund debt service and approximately half of general fund operations. General fund cushion declined but remained ample in three of the last four years. The Nation expects increased gaming revenues in fiscal 2011 to support a general fund operating surplus and addition to fund balance.

EXPANSION DRIVES GAMING REVENUE GROWTH: Cherokee Nation Businesses, LLC (CNB), a component unit of the Nation, continues to expand its gaming operations in the competitive northeast Oklahoma market. The Nation's gaming well-dispersed expansions have offset the effects of adverse events as well as continued increase in competition. In fiscal 2011 (ending Sept. 30), the gaming operations' revenues and EBITDA increased by 5.7% and 7.5% respectively.

RELATIVE REVENUE DIVERSITY: The Nation maintains relative revenue diversity compared to other gaming tribes in that although still concentrated, governmental operations receive support from non-gaming sources for more than half of governmental spending.

TIGHT LEGAL STRUCTURE: Solid legal protections including a daily sweep of pledged revenues to a trustee-held lock box.

STRONG COVERAGE AND ESSENTIALITY: Health care services are essential to the Nation as a service to members and pledged third-party health care revenues provide strong debt service coverage.

WHAT COULD TRIGGER A RATING ACTION

MATERIAL CHANGE IN GAMING ENTERPRISE PERFORMANCE: Strong performance at the gaming enterprise has been 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.

SHIFT IN FISCAL MANAGEMENT: With a new Principal Chief and changes to top management positions, Fitch will monitor developments of the fiscal 2013 budget and other key management decisions with an eye to stability in the Nation's conservative financial management approach.

SECURITY:

The bonds are secured by gross third-party revenues (primarily Medicare and Medicaid) of the health system and a full faith and credit pledge of the Nation. Pledged health system revenues are swept daily, or when first received, to the trustee-held bond fund account with excess of the monthly requirement transferred back to the Nation.

CREDIT PROFILE:

STRONG GAMING PERFORMANCE CONTINUES

Gaming revenues are the largest source of 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's eight casinos are well-dispersed geographically throughout northeast Oklahoma and the Nation continues to reinvest in its facilities.

Following major expansions in fiscal 2010 and 2011, the Nation is adding another hotel tower at its flagship Catoosa facility and replacing two smaller casino temporary structures with permanent ones in Ramona and Ft. Gibson. These projects, with a budgeted cost of roughly $70 million, are being funded through cash flow. CNB has no material debt on its balance sheet as of Sept. 30, 2011.

The market may face additional competition with Kialegee Tribal Town planning to open a gaming facility in Broken Arrow, which is conveniently located relative to Tulsa. The Broken Arrow casino was planed for a 2012 opening but according to news sources the project is being held up by local opposition.

Another tribe (Choctaw) is planning to expand gaming positions at its existing facility near the Nation's third largest facility (Roland). Taken together the above expansions are expected to have a moderate impact on the Nation's gaming revenues with the Nation's own expansions providing meaningful offset.

STABLE HEALTHCARE OPERATIONS; ESSENTIAL SERVICE

The Nation's health care system serves an eligible patient population of approximately 127,000 within its 14-county jurisdictional area. The health care system includes nine clinics and one hospital, Hastings Hospital, which, prior to fiscal 2009 was an Indian Health Services (IHS) managed facility. Primary care visits totaled about 414,000 in fiscal 2011 up from approximately 345,000 in 2009.

Given the growth in demand, the Nation is currently building an additional clinic in Vinita, which was funded by a private placement with the Bank of Oklahoma. Under a joint venture funding agreement with IHS, the construction and operation of the facility should result in enhanced IHS funding beginning in fiscal 2013. IHS funding has been stable at $139 million in fiscal 2010 and $137 million in fiscal 2011. The fiscal 2012 appropriation is expected to be at least $137 million.

The bonds are secured the Nation's full faith and credit as well as by third-party revenues, which have experienced strong growth due to enhanced services and efforts to qualify patients for Medicare and Medicaid. Third-party revenue increased to $67.5 million in fiscal 2011 from $58.6 million in fiscal 2010 and $52.4 million in fiscal 2009. Pledged revenue coverage of maximum annual debt service (MADS) is high and estimated at over 16 times (x) in fiscal 2011. Coverage is higher than originally projected based on lower debt service due to the early debt retirement and to higher pledged revenues noted above.

GOVERNMENTAL FINANCIAL OPERATIONS SUPPORTED BY GAMING AND OTHER ENTERPRISES

The Nation's primary revenue source is derived from its gaming operations. In fiscal 2010 the dividend paid by Cherokee Nation Enterprises, LLC (CNE), which operates its gaming facilities, stayed at a consistent 44% of general fund revenues. According to tribal policy, CNE transfers 35% of its net income to the tribe annually. Gaming revenues did decline slightly in 2009 due to the recession but appear to have rebounded. The Nation reports that for fiscal 2011, on an unaudited basis, the transfer to the general fund will increase by 13.6% over fiscal 2010 with a slight uptick to 45% of unaudited revenues.

Diversification of the revenue stream supporting general government services is provided by the collection of motor fuel, tobacco and motor vehicle taxes. The declines in unreserved general fund balances in fiscals 2009 and 2010 were due to capital expenditures and temporarily increased contributions to certain programs. The Nation closely monitors its budget performance and as the Nation projected at the time of Fitch's last review, unaudited fiscal 2011 results show surplus operations.

After falling to 22% of spending in fiscal 2010 from 28% in fiscal 2009, the Nation's unaudited fiscal 2011 results show an increase in general fund reserves. The unaudited unrestricted fiscal 2011 balance (pursuant to GASB 54, the sum of committed, assigned and unassigned) totals a strong 37% of spending. Total fund balance is much higher, close to 100%, with a large portion of reserves available for spending on the Nation's major programs: highway, health care and education.

The Nation expects to publish the fiscal 2011 audit next month. The Nation's fiscal 2012 budget prudently included a lower amount of fund balance budgeted as revenue as well as conservative assumptions regarding growth in gaming revenues. The Nation reports that fiscal 2012 year-to-date performance is ahead of budget and expects to grow the unassigned general

fund balance again.

NEW LEADERSHIP; CONTINUED STRONG FINANCIAL MANAGEMENT EXPECTED

The Nation is the second largest federally recognized tribe, with approximately 305,000 enrolled members and a tribal jurisdictional area consisting of 9,234 square miles of trust land located over 14 counties in northeastern Oklahoma. The Nation has a tripartite government operated pursuant to a tribal constitution. The executive branch of the Nation is led by the Principal Chief, who is elected at large for a four-year term.

Following a controversial election in June 2011 followed by a special election in September 2011, a new Principal Chief was elected and replaced people in key financial management roles. The fiscal 2013 budget will be the first under the new administration and Fitch will monitor developments under the new management team to evaluate consistency in the Nation's conservative financial management approach - a key credit strength highlighted by Fitch.

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Tax-Supported Rating Criteria' (Aug. 15, 2011);

--'U.S. Local Government Tax-Supported Rating Criteria' (Aug. 15, 2011);

-'Native American Gaming: Rating Methodology' (March 18, 2011)..

Applicable Criteria and Related Research:

Tax-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648898

U.S. Local Government Tax-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648842

Native American Gaming: Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=612565

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