Fitch: Board of Trustees, Univ of AL Rev 2004B & C Bnds 'AAA/F1' & Underlying 'AA-'.

NEW YORK -- Fitch Ratings assigns an 'AAA/F1' rating to The Board of Trustees of The University of Alabama, $13,885,000 general revenue bonds, The University of Alabama taxable series 2004-B bonds, and the $48,100,000 general revenue bonds, The University of Alabama series 2004-C bonds. The long-term 'AAA' rating assigned to each series of bonds is based on the support of a financial guaranty insurance policy provided by MBIA Insurance Corporation, which insures scheduled payments of principal and interest, effective as of the date of issuance of the bonds. The insurance policies will extend to the maturity date of the bonds, unless substitute bond insurance policies are provided in accordance with the terms of the respective supplemental indentures.

The short-term 'F1' rating assigned to each series of bonds is based on the support of standby bond purchase agreements (SBPAs) provided by SouthTrust Bank. The SBPAs provide for the payment of the purchase price of tendered bonds during the daily or weekly interest rate periods. Both series of bonds initially bear interest in the weekly rate mode but may be converted to a daily, flexible, term, auction, or fixed rate of interest. The SBPAs are sized to cover the principal portion of the purchase price and 40 days of interest at the maximum rate of 12%, based upon a year of 365 days. The SBPAs will expire on the initial stated expiration date of Aug. 25, 2005, unless such date is extended, or upon the occurrence of other events of termination, as specified in the SBPAs. The remarketing agent for both series of bonds is Morgan Keegan & Company. The bonds are expected to be delivered on or about Aug. 30, 2004.

While bonds bear interest in the weekly or daily rate mode, interest is payable on the first business day of each month, commencing on Oct. 1, 2004. During the weekly or daily rate modes, holders may tender their bonds for purchase on any business day, following the requisite prior notice to the trustee, The Bank of New York Trust Company, N.A., and the remarketing agent. The bonds are subject to mandatory tender upon any conversion of the interest rate and upon substitution, expiration, or termination of the SBPAs, including following the tender agent's receipt of notice from the bank of an event of default under the SBPA, stating that the SBPA will terminate in 30 days. A mandatory tender also occurs upon substitution of the bond insurance policy. The short-term rating on the bonds will expire upon any expiration or termination of the SBPAs. Mandatory and optional redemption provisions also apply to the bonds pursuant to the terms of the documents.

The university's underlying 'AA-' rating is primarily attributable to positive operating performance, stable to growing enrollment, which reached 20,333 in fall 2003, diversified revenues, and competitive tuition. The most significant area of concern centers on the increasing debt burden. With the issuance of the series 2004 bond, the amount of bonds outstanding will double from the amount outstanding at the end of fiscal 2003. Maximum annual debt service of $20.5 million would represent a 4.9% use of fiscal 2003 revenues. Future debt issuance should be much smaller and currently includes approximately $44 million of additional debt. The lack of significant additional debt, coupled with the ability of the university to manage its finances to positive operating margins, leads Fitch to conclude that the debt burden is manageable.

The proceeds of the sale of the bonds will be used to finance a portion of the cost of expanding Bryant-Denny Stadium and certain other capital improvements for the University of Alabama, located in Tuscaloosa, Alabama.

Contact: For information on the series 2004-B or 2004-C bonds, Trudy Zibit 212-908-0689, New York. For information on the Board of Trustees of The University of Alabama and the underlying rating, Pam Clayton 212-908-0728, New York.