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Indian River Memorial Hospital , Inc . and Subsidiaries Notes to Consolidated Financial Statements For the Years Ended September 30 , 2002and 2001 The Series 1989 Bonds were issued in February 1989 to purchase the PNB . The bonds bear interest at a variable rate equal to a defined market rate, provided that it does not exceed 15 % per annum, which averaged 1 . 8% in 2002 and 3 .3 % in 2001 . The bonds are subject to mandatory redemption requirements from 2005 through 2019 at graduating amounts, The Series 1990 Bonds were issued in June 1990 to finance new construction and capital improvements to the Hospital Facility. The bonds bear interest at a variable rate equal to a defined market rate, provided that it does not exceed 15% per annum, which averaged 1 . 6% in 2002 and 3 .2% in 2001 . The bonds are subject to mandatory redemption requirements at graduating- amounts through 2024. -- _ - The principal and interest payments on the Series 1985, 1988,1989 and 1990 Bonds (the Bonds ) are secured by irrevocable letters of credit totaling approximately $633,500,000 with a bank which expire on October 1 , 2004; unless extended at the sole discretion of the bank. The letters of credit are utilized to purchase bonds which are tendered by the bondholders and not remarketed under a remarketing agreement between the Hospital, the District and an investment banking firm. Amounts drawn on the letters of credit bear interest at prime rate plus 1 % or LIBOR plus 1 %, payable monthly in arrears on the first day of each month. The Hospital and the District are required to pay, in arrears, fees on the available letter 6f credit equal to 1 % of the highest letter of credit commitment during the quarterly period. The Bonds will be subject to mandatory purchase by the Hospital and the District if the letters of credit expire or are terminated and no alternative letters of-credit are provided which would maintain the existing rating on the Bonds. The irrevocable letters of credit include restrictions on the issuance of new debt and requirements on the maintenance of certain operating ratios and unrestricted net assets. The letters of credit will be withdrawn in the event of default by the Hospital or the District or upon the conversion of the Bonds to fixed interest rates as allowed under the existing trust indentures. The Hospital is in breach of the - debt service coverage ratio covenant at September 30, 2002 and onMay 1 , 2003 received a letter from Financial Security Assistance noting the Hospital is following remedies under the Master Indenture, The Indian River County Hospital District Hospital Revenue Refunding Bonds, Series 1996 were issued on September 30, 1996 and are referred to as the Hospital Revenue Refunding Bonds, Series 1996. The net proceeds of approximately $ 13 , 700,000 were utilized in June 1997 to advance refund a portion of the Orange County Health Facilities Authority Refunding Program Revenue Bonds, Series 1985A (Pooled Hospital Loan Program) issued in December 1988 (the "Hospital Revenue Refunding fonds, Series es 1988-Y) . The Hospital Revenue Refunding Bonds, Series 1996 consist of two serial bonds and two term -honds. The serial bonds bear interest at fixed rates of 4 . 7% and 5 .2% and mature in 2001 and 2006, respectively. The term bonds bear interest at fixed rates of 5 . 5 % and 5 . 7%, mature in 2011 and 2015 , respectively, and are subject to mandatory redemption requirements from 2010 through 2015 . -22-