Fitch Rates Alaska Hsg $96.2MM State Capital Project Bonds 2006 Series A Underlying, 'AA+'.

NEW YORK -- Fitch Ratings assigns an underlying rating of 'AA+' to Alaska Housing Finance Corp.'s (AHFC, or the corporation) state capital project bonds, $96.2 million 2006 series A. The bonds are expected to be insured by MBIA whose insurer financial strength is rated 'AAA' by Fitch. Additionally, Fitch affirms the underlying 'AA+' rating on the outstanding $114.2 million state capital project bonds, 2002 series A, B and C and 2001 series A. The 2006 series A bonds are to be sold the week of Oct. 1, 2006 as a negotiated transaction by an A.G Edwards led syndicate.

The bonds are the seventh series issued under a master indenture dated Dec. 1, 1998. A portion of the bonds will be used to refund certain corporation obligations; remaining proceeds will be used to reimburse the corporation for funding governmental purpose projects. The bonds are not secured by a pledge of specific assets and are secured solely by the general obligation (GO) pledge of the AHFC, rated 'AA+' by Fitch.

The corporation'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 the AHFC's consolidated loan portfolio, the real estate market's vulnerability to the state's oil-dependent economy, and, to a lesser extent, the unpredictability of the state transfer liabilities.

AHFC's consolidated financial results for the nine months ended March 31, 2006 indicated a continued strong financial position and an increase in earnings despite combined capital transfers to and debt service payments on behalf of the state totaling more than $315 million during the previous four fiscal years. AHFC's adjusted debt to equity ratios are among the lowest of all housing finance agencies and increased slightly to 1.9 times (x) at March 31, 2006 compared to both 1.8x in fiscal 2005 and fiscal 2004. The stability of the corporation's low adjusted debt-to-equity ratio reflects stable fund equity despite additional outstanding debt. At the nine months ended March 31, 2006, AHFC had nearly $3.1 billion of total bonds and debt outstanding, up from $2.9 billion in both fiscal year 2005 and 2004.

Overall, AHFC's net income before extraordinary items equaled $33.7 million during the nine months ended March 31, 2006, a slight increase (when annualized) from $40.1 million the previous fiscal year and represents a return to levels experienced by the corporation over the past three fiscal years. Net interest spread remained approximately the same at 42.1% during the nine months ended March 31 2006 from 42.3% in fiscal 2005. Net operating margin increased slightly to 14.2% at March 31, 2006, from 13.0% the previous fiscal year.

As of July 31 2006, there were $114.2 million of outstanding state capital project bonds. Other debt additionally secured by AHFC's GO debt pledge included (as of July 31, 2006): $429.7 million home mortgage revenue bonds, $401.2 million housing development bonds, and the corporation's commercial paper program.

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