Correction: Fitch Rates $50MM Memphis International Airport Revs 'A+'.

Business Editors

NEW YORK--(BUSINESS WIRE)--Nov. 12, 2002

Fitch Ratings--(This is an amended version of a press release issued earlier today, containing revised information on the dollar amount and new series listed in paragraph 1.)

Fitch Ratings assigns an 'A+' underlying rating to the Memphis-Shelby County Airport Authority, TN's $26,000,000 series 2002 airport revenue refunding bonds (alternative minimum tax (AMT)), and $24,000,000 series 2003A forward purchase airport revenue refunding bonds (non-AMT). The bonds will be priced the week of Nov. 18 through negotiation led by Morgan Keegan. Also in the syndicate is Goldman Sachs, Jackson Securities, FTN Capital Markets Group, NBC Capital Markets Group and Harveston Securities. Final maturity is 2016, and the bonds are expected to carry insurance. The series 2002 and series 2003A bonds are being issued to refund certain portions of the Memphis International Airport (MEM) airport revenue bonds, and the bonds are secured by a net revenue pledge generated by MEM. As of June 30, 2002, MEM had $634 million in outstanding airport revenue bonds.

The Rating Outlook for MEM is Negative at this rating level, due largely to the financial condition of Northwest Airlines (Northwest) and MEM's third-tier hub status for Northwest. Fitch rates Northwest Airlines' senior unsecured corporate bonds 'B+' with a Negative Rating Outlook. Northwest continues to operate at MEM below projected activity level from the 2001 forecast, though it recently re-instituted its 4th bank of flights after the post-Sept. 11 aviation slump. While the base case feasibility study may contain some optimism in respect to steady and stable traffic growth from Northwest's activity, the presence of FedEx's world headquarters 'Super Hub' largely mitigates this. MEM has temporarily postponed its planned series 2002 new money bond issuance until activity levels are back to normal and the aviation environment is more stable. MEM's budgeted fiscal year 2003 (FY03) airline cost per enplaned passenger (CPE) is $6.43, about 26% higher than forecast, but the delay in new money issuance should all eviate this. MEM's CPE level is considered moderate for a medium hub airport.

MEM's credit strengths include its strategic location, and diversity of service that includes passenger and cargo. Centrally located in a distribution corridor with excellent access to highways, railroads, and Mississippi River ports, MEM's growth is largely driven by the expansion of commercial activity. FedEx operates its world hub headquarters at MEM and has significant investment there. FedEx accounts for 55% of landed weight at MEM. Northwest operates its third largest hub at MEM, driving 79% of the 5.07 million enplanements FY02, down from 6.18 million in FY01. Northwest reinstituted its 4th bank of daily flights reinstituted in June 2002 after canceling it in October 2001. Lack of delays and favorable weather conditions are a few of the reasons why the airport is well suited as a hub.

Offsetting credit factors include carrier concentration, historical enplanement fluctuation, low O&D levels (26%), and the general weakness in the aviation industry. Two companies at the airport, FedEx and Northwest, dominate air carrier service. However, air cargo demand is relatively stable, illustrated, in part, by the ever-increasing volume worldwide and UPS's recent addition at MEM. On the passenger side, Northwest and its regional partner provide approximately 79% of the passenger service at MEM. In the late 1980s, Northwest decreased its service at the airport, and the other airlines did not add additional service. Fitch will monitor the airport's ability to manage its debt load. Despite the events of Sept. 11 in the aviation industry that affected MEM's FY2002 operations, MEM's FY2002 debt service coverage ratio was 1.35 times (x) for its airport revenue bonds, providing adequate cushion above its 1.25x rate covenant.