Fitch Affirms & Removes Interpool From Rating Watch Negative; Outlook Now Positive.

NEW YORK -- Fitch Ratings affirms Interpool, Inc.'s (Interpool) senior secured, senior unsecured, and preferred stock ratings at 'BB-', 'B', and 'CCC+', respectively. The ratings are removed from Rating Watch Negative where they were placed on Oct. 10, 2003. The Rating Outlook is Positive. Approximately $322 million of debt and trust-preferred securities are affected by Fitch's action.

The Rating Watch Negative was removed as Interpool has completed its financial restatement for fiscal years 2000, 2001, and 2002 with a negligible impact to credit fundamentals. While the company is not yet current with its Securities and Exchange Commission (SEC) financial statement filings, Fitch has gained confidence that the company is ahead of the schedule announced in November 2003 to be in compliance with SEC financial statement reporting deadlines by the end of 2004. Interpool has also been successful at maintaining an acceptable liquidity position through sourcing new secured financing and consistent retention of meaningful unrestricted cash balances.

The Positive Rating Outlook reflects Fitch's view that Interpool will continue its progress at becoming a timely SEC filer and also considers an expected strengthening of the company's information technology, accounting, and legal infrastructure resulting from the implementation of recommendations from Morrison and Foerster, LLP's forensic review of the company's operations. These improvements, when completed, will enable the company to better monitor, manage, and track equipment as well as improve the efficiency and integrity of its billing and cash management systems.

Other strengths focus on the company's liquidity position. Despite full utilization of its revolving credit facility, Interpool has over $100 million of unrestricted cash on hand, in addition to generating roughly $40 million-$50 million of cash from operations before capital expenditures, on a quarterly basis. Combined, these should be sufficient to address the company's debt service requirements over the next 12 months. However, Interpool is also in the process of negotiating additional financings that would, over the long term, simplify the capital structure and provide additional liquidity resources. Completion of any new financings, in addition to providing additional liquidity, would allow opportunities to accelerate growth of the equipment fleet. However, depending upon the terms and conditions, they may cause the notching between the secured and unsecured ratings to be expanded.

Fitch also believes that Interpool's core balance sheet fundamentals remain adequate. As the company has not been aggressively growing its equipment fleet while at the same time repaying debt, financial leverage has declined. Fitch believes that leverage, defined as debt divided by equity with 65% equity credit to the $75 million trust-preferred security, has declined to below 3.65 times (x) as of June 30, 2004 from 4.01x at Sept. 30, 2003. Interpool's risk-adjusted capitalization also remains strong, as the adjusted-to-required equity ratio has been near 1.0x over the past several years.

Interpool is also facing favorable conditions in both the intermodal container and chassis leasing businesses. Fiscal 2004 has seen new container prices increase by approximately 40% and, more importantly, prices are now higher than they were in 1999. Many containers leased in 1999 are now up for renewal in 2004. Due to the nearly one to one correlation of container prices to lease rates, it is anticipated that Interpool may be able to improve its lease margins for containers subject to lease renewal. However, the company's strategy of leasing containers predominantly on a long-term basis means that only a small portion of the fleet renews each year, and therefore, a noticeable earnings boost should not be expected in the short term. Nevertheless, Fitch views Interpool's long-term leasing strategy favorably as it can help mute income volatility over time.

Concerns center on Interpool's delinquent SEC financial filing status. Should the company fail to complete its 2003 10-K by Aug. 31, 2004, it would be forced to seek another round of waivers from its bank group. Fitch notes that creditors have been cooperative in the past when many of the company's credit metrics were weaker and greater uncertainty surrounded Interpool's future direction. Additional concerns center on the company's limited supply of unencumbered assets. Some previously unpledged assets have been pledged to secured lenders over the past nine months to secure new financing. While this has afforded time to complete the restatement of the 2000, 2001, and 2002 financials, it has affected the position of senior unsecured creditors in the capital structure.

Other concerns focus on Interpool's lack of access to the public equity capital markets. While leverage and capitalization is currently solid, lack of access to public equity capital limits the ability to grow assets at a rate beyond the company's own internal capital formation rate.

Fitch also believes that Interpool has modestly increased its cost base through the hiring of additional accountants, legal staff, information technology staff, and the engagement of additional internal auditors, as well as the deployment of new computer hardware and software. These additions, while necessary to support the company's operational integrity, may have a modest impact on profit margins.

Tracing its roots to 1968 and based in Princeton, NJ, Interpool, Inc., through its subsidiaries, is the largest lessor of domestic chassis and, in combination with 50% owned subsidiary Container Applications International, the largest lessors of marine containers in the world.