Correction: Fitch Assigns 'BBB+' Underlying Rtg to Covenant Retirement Communities' --IL-- Ser 2004 Taxable VRDBs.

Business Editors

NEW YORK--(BUSINESS WIRE)--May 7, 2004

(This is an amended version of a press release issued yesterday, containing revised debt service coverage figures.)

Fitch Ratings assigns a 'BBB+' underlying rating to the approximately $19.5 million Illinois Finance Authority Revenue Bonds (Covenant Retirement Communities), series 2004 taxable variable rate demand bonds and affirms its 'BBB+' rating on the outstanding bonds listed below. The Rating Outlook is Stable. Proceeds of the series 2004 bonds will be used to refund the series 1997 bonds outstanding for Windsor Park Manor. The series 2004 bonds will bear interest at the taxable floater rate until the first call date on the series 1997 bonds, at which time the 2004 bonds are expected to be converted to tax-exempt variable rate demand bonds. With the issuance of the 2004 bonds, Windsor Park Manor will become a member of the Obligated Group under Covenant Retirement Communities (Covenant) Master Trust Indenture. Fitch expects to assign a 'AA-/F1+' rating to the series 2004 bonds based on a direct pay letter of credit provided by LaSalle Bank National Association prior to the closing date. The bonds are expected to sell the week of May 10th via negotiation by Ziegler Capital Markets Group.

Covenant's financial position improved considerably in fiscal year 2004 (ended Jan. 31, 2004) based on unaudited 12 month financial information. While operating performance continues to be lackluster, investment income rose considerably and resulted in net income of $10.06 million, an improvement from the $7.78 million net loss experienced in FY2003. While Fitch notes that operating performance deteriorated in FY2004, Covenant is currently undertaking construction projects at several of its campuses which has hampered operating performance. Fitch does expect operating performance to improve once the construction projects are completed and stabilization occurs. Debt service coverage improved to approximately 2.4x in FY2004 from 1.5x in FY2003 (including debt service on the series 2004 bonds). Unrestricted cash reserves increased approximately $41.5 million to $128 million due to strong entrance fee receipts and improved investment returns (unrealized and realized gains totaled approximately $26 million). Days cash on hand improved to 333 days, above Fitch's 'BBB' median of 301 days. Fitch expects unrestricted cash to remain sound as new unit sales should result in increased entrance fee revenues and cash flow.

Fitch continues to view Covenant's geographic diversity, large revenue base, good occupancy at most facilities, solid liquidity position, manageable debt burden and strong coverage of maximum annual debt service as the primary strengths. Credit concerns include the continued loss on an operating basis, reliance on investment income, ongoing construction projects and future capital needs.

Headquartered in Chicago, Ill., Covenant owns and operates 14 retirement facilities in 8 states, providing 2,987 independent living units, 699 assisted living units, and 909 nursing beds. Fitch notes that in January 2004, Ebenezer Covenant Home, a 28-bed assisted living and 65-bed nursing home, was sold and is no longer a member of the Obligated Group.

Covenant's disclosure requirements under its bond documents include the submission of annual audited statements within 120 days of fiscal year-end and quarterly disclosure within 45 days of quarter end to NRMSIRs. Covenant's disclosure to Fitch has been good with timely receipt of quarterly statements which include a consolidated balance sheet, income statement, statement of cash flows, and occupancy statistics by facility. Fitch notes that the fiscal 2004 numbers presented in this press release are based on draft audited statements, and management has indicated that no material adjustments to the final FY 2004 audit are expected.

Outstanding Debt:

Fitch affirms the following outstanding debt:

-- $33,200,000 Illinois Health Facilities Authority Revenue Bonds,

Series 2002A;

-- $49,700,000 Colorado Health Facilities Authority Revenue Bond,

Series 2002B;

-- $22,000,000 Illinois Health Facilities Revenue Bonds, Series

2001;

-- $28,160,000 City of Golden Valley, MN Revenue Bonds, Series

1999A;

-- $22,550,000 Colorado Health Facilities Authority Revenue Bonds,

Series 1995;

-- $4,295,000 Illinois Health Facilities Authority Revenue

Refunding Bonds, Series 1998;

-- $9,550,000 City of Plantation Health Facilities Authority

Revenue Refunding Bonds, Series 1998;

-- $2,680,000 City of Buffalo, MN Revenue and Refunding Bonds,

Series 1998;

-- $6,860,000 Connecticut Development Authority Revenue Refunding

Bonds, Series 1998.

Not Rated:

-- $18,900,000 California Statewide Communities Development

Authority Variable Rate Certificates of Participation, Series

1992;

-- $21,500,000 California Statewide Communities Development

Authority Variable Rate Certificates of Participation, Series

1995;

-- $12,900,000 Colorado Health Facilities Finance Authority

Variable Rate Revenue Bonds, Series 1999A;

-- $9,430,000 Michigan State Hospital Finance Authority Variable

Rate Demand Bonds, Series 1999A;

-- $9,840,000 State of Connecticut Health and Educational

Facilities Authority Variable Rate Demand Revenue Bonds,

Series A.