Correct: Fitch Rates Virginia Public School Authority $115.9MM 1997 Resolution Bonds 'AA+'.

Business Editors

NEW YORK--(BUSINESS WIRE)--April 12, 2002

(This press release was issued 4/11 and had an error in the series. The amended press release follows.)

Fitch Ratings-New York-April 11, 2002: Virginia Public School Authority's (VPSA) $115,900,000 school financing bonds (1997 resolution), series 2002A, for competitive bids April 17, are rated 'AA+' by Fitch Ratings. The bonds will be due Aug. 1, 2003-22, and may be optionally callable beginning Aug. 1, 2012 at par. The authority may alter principal maturities by 10%, and the winning bidder may designate up to two term maturities with mandatory sinking fund redemption corresponding to the designated serial maturities. Additionally, the authority's $1.1 billion outstanding 1997 resolution bonds are affirmed at 'AA+'. Bond proceeds will be used to purchase general obligation school bonds from 6 localities, all of which have prior 1997 resolution debt; Prince William County and Shenandoah County respectively represent 47% and 22% of this issue.

These bonds are the eleventh issuance under the separately secured 1997 resolution, which continues the commonwealth's program of providing loans to local units for school construction purposes. This resolution enables greater structural and borrowing flexibility for the local county and city issuers and simplifies program administration. It is intended to supplant school financings previously accomplished under the 1987 and 1991 resolutions, the latter which neared its borrowing cap and the former suspended since 1993 as coverage dropped below the authority's higher policy levels (though still in excess of the required 1.11 times (x) coverage.

Initial security for the 1997 resolution bonds is the same as for the prior resolutions: repayments of the general obligation loans made to local units for schools at 10 basis points above the authority's borrowing costs, and the strong state aid intercept which transcends fiscal years and under which the commonwealth immediately advances funds in the event of a local unit's default. There have been no local defaults in VPSA's more than 35-year operating history. However, unlike the prior resolution programs, ultimate security derives from a 'sum sufficient' appropriation for debt service from the Literary Fund (a constitutional perpetual fund receiving escheats, unclaimed property, etc.) and from the commonwealth's general fund if there is insufficiency in the Literary Fund. While Literary Fund transfers for teachers' pensions were last made in fiscal 1999, the 2000-02 biennial budget transfers an amount equal to unclaimed lottery prizes to the general fund, estimated at $9 million annually. However, the commonwealth's current financial pressures have resulted in proposed executive amendments for this year, including the shift of $53 million teachers' retirement costs to the Literary Fund. Further application of Literary Fund for teacher's retirement is also incorporated in the proposed 2002-04 budget bill, to be considered by the legislature when it reconvenes April 17.

The governor must include the sum sufficient appropriation in the biennial budget bill, a security feature now codified, and the 2002-04 budget bill includes such an appropriation. This provision upfronts the commonwealth's own credit for this program and in essence provides two times coverage of debt service, contributing to the high quality rating and differentiating this security from bonds issued under the prior 1987 and 1991 resolutions, which are rated 'AA'. Virginia's general obligation bonds are rated 'AAA'.