Cleveland Clinic Health System Obligated Group - FMSbonds.com

DEBT SERVICE COVERAGEThe following table sets forth, for the fiscal years ended December 31, 2006 and 2007, the ObligatedGroup’s income available to pay maximum annual debt service on Master Notes of the Obligated Group assumingthe issuance of the Series 2008A Bonds and the Variable Rate Bonds.(in thousands)December 31,2006 2007Excess of revenues over expenses $389,035 $379,966Plus depreciation, amortization and interest 229,803 242,251(Less increase) plus decrease in unrealized netgains on investments and value of interest rateswaps(56,447) 55,079Funds available for debt service $562,391 $677,296Maximum annual debt service 1 $126,736 $126,736Historical coverage of pro forma debt service 4.44x 5.34x_________________________1Maximum annual debt service on outstanding Master Notes issued to secure or guarantee related revenue bonds. It has beenassumed all indebtedness bearing interest at a variable rate bears interest at a constant interest rate of 3.50% per annum. It has alsobeen assumed that the Variable Rate Bonds are issued in an aggregate principal amount of $670,000,000.GeneralBONDHOLDERS’ RISKSThe following is a discussion of certain risk factors that could affect payments to be made with respect tothe Series 2008A Bonds. The discussion is not exhaustive, should be read in conjunction with all other parts of thisOffering Circular. It should not be considered as a complete description of all risks that could affect such payments.Prospective purchasers of the Series 2008A Bonds should analyze carefully the information contained in thisOffering Circular, including the Appendices hereto, and additional information in the form of the completedocuments summarized herein, copies of which are available as described in this Offering Circular. See the caption“INTRODUCTORY STATEMENT — Availability of Documents” above.As set forth under “SECURITY FOR THE SERIES 2008A BONDS,” the Series 2008A Bonds will bepayable by the Commission solely from Hospital Receipts (i.e., all rentals and other moneys received by theCommission or the Bond Trustee pursuant to the State Financing Lease with the Cleveland Clinic, including,without limitation, Basic Rent and moneys and investments credited to the Special Funds created under the BondIndenture, and income from the investment of those moneys) and from amounts payable under the Sixtieth MasterNote and the Variable Rate Note assigned by the Commission to the Bond Trustee. No representation or assurancecan be made that revenues will be realized by the Obligated Issuers in amounts sufficient to provide funds forpayments on the Series 2008A Bonds when due and to make other payments necessary to meet the obligations of theObligated Issuers. Further, there is no assurance that the revenues of the Obligated Issuers can be increasedsufficiently to compensate for cost increases that may occur.The receipt of future revenues by the Obligated Issuers is subject to, among other factors, federal and statelaws, regulations and policies affecting the health care industry and the policies and practices of major managed careproviders, private insurers and other third party payors and private purchasers of health care services. The effect onthe Obligated Issuers of recently enacted laws and regulations and recently adopted policies, and of future changesin federal and state laws, regulations and policies, and private policies, cannot be determined at this time. Loss ofestablished managed care contracts of an Obligated Issuer could also adversely affect its future revenues.21