Fitch Rates Greater Richmond Convention Center, Virginia $148.8MM Rfdg Bonds 'A'.

WASHINGTON -- Fitch Ratings assigns an 'A' rating to the Greater Richmond Convention Center Authority (GRCCA), Virginia's approximately $148.8 million hotel tax revenue refunding bonds, series 2005. Fitch also upgrades to 'A' from 'A-', the authority's $15.8 million of outstanding series 2000 bonds not refunded by this issue. The current offering is scheduled for negotiated sale on March 1 with Morgan Keegan and Company, Inc. as lead manager. The bonds are limited obligations of GRCCA, secured by the appropriation of revenues derived from a multi-jurisdictional hotel tax agreement, as well as a deed of trust on the facility and other trustee-held funds. Bond proceeds will be used to advance refund all outstanding series 2000 bonds, totaling $138.3 million, maturing on or after June 15, 2011 for net present value savings estimated at 7.3% of refunding par. Nominal annual savings are to be taken on an approximately equal annual basis.

The rating reflects the overall strength of the Richmond area economy, which Fitch anticipates will continue to generate hotel tax revenues sufficient to provide solid debt service coverage, an adequate additional bonds test that protects against future expansion-related leverage, and the ongoing commitment of the four highly rated municipal participants to the project.

The upgrade to 'A' is based on the realization of forecasted hotel tax revenues and debt service coverage, the successful completion and opening of the convention center expansion, reasonably favorable facility utilization, and an aggressive downtown Richmond redevelopment program that Fitch believes could boost dedicated hotel tax revenues and convention center attendance. Fitch's initial rating of this security incorporated risks that have now abated; in particular, the need for additional hotel development to achieve projected coverage and construction risk typical of large-scale public building projects. The Rating Outlook is Stable.

GRCCA comprises the City of Richmond and the three surrounding counties of Chesterfield, Hanover, and Henrico. The area has shown strong economic growth, with low unemployment, increasing income levels, and significant commercial development. The diverse economic base includes state and local government, health care, financial services, higher education, and retail trade, as well as high-technology and traditional manufacturing. Continuing commercial and civic development activity enhances prospects for sustained growth in hotel tax receipts.

Fitch's general obligation bond ratings on the four participating entities are as follows:

-- Richmond 'AA';

-- Chesterfield County 'AAA';

-- Hanover County 'AA+' (Positive Outlook);

-- Henrico County 'AAA'.

Cumulative hotel tax receipts are in line with original forecasts, although there has been variability due to slowdowns in travel related to the events of Sept. 11 and the Washington-Richmond area sniper attacks of 2002. Tax receipts rose 12.4% in fiscal 2004 over the prior year, reflecting both a solid rebound in visitation and higher than expected hotel property development. Debt service coverage for fiscal 2004 was 1.47 times (x), slightly above forecast, and coverage for fiscal 2005, net of annual reserve fund interest earnings and the effects of this refunding, is projected to be 1.60x.

To date, bookings and attendance are consistent with the feasibility study done prior to the series 2000 bond sale, although the mix of activity has varied. Fitch expects that competition from two new convention facilities scheduled to open in southeastern Virginia, as well as the new Washington, D.C. facility, will require ongoing marketing efforts to sustain activity. Further, progress has been slow in developing lower cost air service to Richmond, although GRCCA believes its efforts to attract regional events within driving distance offset this disadvantage.