CORRECT: Fitch Rts Illinois Development Finance Auth Revolving Fund Rev Bds, 'AAA'.

Business Editors

NEW YORK--(BUSINESS WIRE)--June 4, 2002

(In a press release issued yesterday, the sale date was incorrect. The amended press release follows.)

Fitch Ratings-Chicago-June 3, 2002: Fitch Ratings assigns a 'AAA' rating to the Illinois Development Finance Authority's state revolving fund (SRF) $150,000,000 bonds, series 2002. Proceeds will be used to make clean water and drinking water loans to municipalities throughout the state and to pay costs of issuance. The bonds, are expected to sell June 12 on a negotiated basis led by UBS Paine Webber. First Albany Corporation will also underwrite the issue.

The 'AAA' rating reflects the program's ample security provided by a sizable reserve fund and certain existing loans pledged to bondholders that provide excess cash flow coverage. Other key strengths include loan pool diversification, a cross-collateralized structure, strong underwriting standards, and superior investment practices. The series 2002 bonds, are the first leveraged funds of the State of Illinois federally capitalized and state matched funded Clean Water SRF and Drinking Water SRF (CWSRF and DWSRF, respectively).

Established under a master trust agreement as a cash flow and reserve hybrid structure, the SRF program will leverage $278.8 million of its $1.2 billion currently outstanding clean water and drinking water loans. The Master Trust Agreement permits additional series bonds, to be issued on a pooled or stand-alone basis; such series bonds, will be secured by separate state revolving fund loans in the portfolio. Excess revenues from each bond series issued under the master trust agreement will be deposited into a deficiency fund to meet debt service requirements in the event funds on deposit in the respective bond accounts are insufficient.

The combined CWSRF and DWSRF portfolio securing the series 2002 bonds, includes 109 borrowers and $278.8 million of outstanding loans. Although approximately 82% of the outstanding combined portfolio is non-rated, the program's 'AAA' credit quality reflects the pool's diversity and the strong loan default tolerance exhibited in the program's cash flows. Rock River Water Reclamation District, the program's largest pledged borrower (also non-rated), accounts for only 5% of all pledged loans. The top ten largest pledged borrowers make up only 32% of total pledged loans. As future loans are made from subsequent series of bonds, larger, investment-grade borrowers, such as the City of Chicago (senior lien water revenue bonds, currently rated 'AA+' by Fitch Ratings), which currently does not participate in IDFA's SRF, will likely increase the overall credit quality of the individual portfolio.

Bond security for the current issue is strong as a debt service reserve fund established under the 2002 series indenture is funded at 50% through final maturity for CWSRF and DWSRF bonds, which is well above the 10% required under the Master Trust Agreement. The bond documents also require cash flow coverage of 1.10 times(x) maximum annual debt service prior to the release or substitution of pledged loans or the issuance of additional bonds. IDFA projects that cash flow from the 109 pledged loan repayments and debt service reserve fund earnings will provide 1.63x coverage during the first ten years gradually declining to 1.23x coverage in 2020 -- the final year of maturity.

The excess cash flows and reserve funds provide for a 66% default tolerance in the first and middle four-year periods and a Strength Index of 179%; this means that near and mid-term default tolerance exceeds that required by the Fitch Ratings 'AAA' SRF stress tests by a margin of 1.79:1. IDFA's bond structure provides significant flexibility to accommodate local communities' CWSRF and DWSRF lending needs as they arise. However, anticipated demand should not adversely impact cash flow coverage and overall credit quality of the program.