Fitch Rates Alaska Muni Bond Bank Auth $6.0MM Rev Bonds 'A'.

Business Editors

NEW YORK--(BUSINESS WIRE)--Nov. 27, 2002

The Alaska Municipal Bond Bank Authority's $6,015,000 Revenue Bonds, 2002 Series A are rated 'A' by Fitch Ratings. The bonds will be sold through negotiation by RBC Dain Rauscher on or about Dec. 3.

The rating reflects the bonds' several security layers, the strongest of which is the state's ability to replenish a debt service reserve fund and to withhold state aid payments to the borrower, the city of Ketchikan, if it defaults on its debt service payments to the bond bank authority. The rating also is based on the authority's strong debt repayment history, the transaction's sufficient reserves, and the city utility's good credit quality.

The authority will use bond proceeds to purchase debt issued by the city of Ketchikan. Ketchikan will use their bond proceeds to refund a portion of outstanding utility revenue bonds. The bond bank debt is secured initially by the city's debt service payments, which have a first lien on utility system net revenues. The lien is on par with $21.5 million in outstanding parity bonds, most of which is held by the authority. Authority bond security includes two debt service reserve funds each at or near maximum annual debt service, the state's ability but not obligation to replenish one of these reserves, and a state aid intercept mechanism. Also, the authority can use its custodian account to make payments to bondholders in the event of non-payment by the city, although this account is not pledged to any authority debt. At June 30, 2002 the account held $20.0 million. Also, the state legislature could appropriate the custodian account to another state use. The custodian account has never been used for non-bond bank purposes.

Ketchikan Public Utilities provides electric, telephone, and water service to the city's 8,345 residents and electric and telephone services to about another 5,000 residents of Ketchikan Gateway Borough. System financial operations are sound, with net revenues covering debt service about 2.3 times (x) in recent years. However, coverage is projected to decline to 1.5x in fiscal 2004 with the city's planned $22.5 million in additional debt. This projection also assumes a rate increase. Legal protections are adequate with additional bond issuance requiring 1.1x debt service coverage based on historic revenue or 1.4x based on projections. The system's revenue base is somewhat concentrated and limited by the area's economy, which is dominated by commercial fishing, timber and tourism.

The authority has a strong debt repayment history for both its general obligation and revenue bond programs. No debt service reserve deficiency has ever existed in either program that required state replenishment, and the authority has never utilized the state aid intercept.