Fitch Rates Alaska HFC $110MM State CPBs 2002 A-C 'AA+', 'AA+/F1+'.

Business Editors

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

Fitch Ratings assigns an underlying rating of 'AA+' to Alaska Housing Finance Corp.'s (AHFC) $110 million state capital project bonds, 2002 series A, B, and C. The bonds are expected to be insured by MBIA Insurance Corp., whose insurer financial strength is rated 'AAA' by Fitch. The series A bonds are expected to be sold this week and the series B and C bonds are expected to be sold during the week of Dec. 2. All series will be sold as a negotiated transaction by a Bear Stearns & Co. Inc.-led syndicate.

Additionally, Fitch assigns an 'F1+' rating to the 2002 series C variable-rate tender option bonds. The short-term 'F1+' rating reflects the strong credit quality and ability of AHFC to provide liquidity on a timely basis in the event that tendered bonds are not remarketed.

The bonds are the fourth series issued under a master indenture dated Dec. 1, 1998. A portion of the bonds will be used to redeem certain corporation obligations; remaining proceeds will be used to fund AHFC's capital budget, renovation and maintenance of AHFC's public housing facilities, and to make payments to the state to fund governmental purpose projects. The bonds are not secured by a pledge of specific assets other than the accounts established under the indenture. The bonds will be secured solely by the general obligation (GO) pledge of AHFC. AHFC's GO debt pledge rated 'AA+' by Fitch.

AHFC's GO debt rating is based on its strong financial position, favorable operational and financial results, successful management track record, and sufficient liquidity and reserves. Credit concerns remain centered on the geographic concentration of AHFC's consolidated loan portfolio and the real estate market's vulnerability to the state's oil-dependent economy.

AHFC's consolidated financial statements for the fiscal year ended June 30, 2002 show a declining but sufficient level of earnings and continued strong financial position despite combined transfers to and debt service payments on behalf of the state totaling approximately $450 million over the last five fiscal years. AHFC's leverage ratios are among the lowest of all state housing finance agencies (SHFAs). Its debt-to-equity ratio equaled 1.9 times (x) as of June 30, 2002 compared with 1.7x the prior two fiscal years. The rise stems from an increase of $370 million in corporation debt outstanding in 2002, despite a relatively unchanged equity base.

AHFC's operating income in fiscal 2002 totaled $75.7 million, down somewhat from fiscal 2001 when it was $96.4 million. Net interest spread (net interest income divided by total interest income) equaled 40.5% during fiscal 2002, a decline from 45.5% the prior year, but well above average (23.1% during 2001) for all SHFAs. AHFC's net operating margin (net operating revenue divided by total revenue) excluding the GASB 31 adjustment was 21.7% in fiscal 2002, nearly double the median (11.4% during 2001) for all SHFAs.

As of June 30, 2002, there were $196.8 million of outstanding state capital project bonds. Other debt secured solely or primarily by AHFC's general obligation debt pledge included (as of June 30, 2002): $182 million general housing purpose bonds, $558 million government purpose bonds, $195 million housing development bonds, and AHFC's commercial paper program ($108.5 million). Subsequently, AHFC issued an additional $125 million in housing development bonds.