Fitch Rates Montana Facility Finance Authority's $14MM Health Care Revs 'A+'.

SAN FRANCISCO -- Fitch Ratings assigns an 'A+' rating to the following revenue bonds for the Montana Facility Finance Authority:

-- $3.995 million health care facilities revenue bonds (master loan program -- Marias Medical Center project, Shelby, MT) series 2005A;

--$9.925 million health care facilities revenue bonds (master loan program -- Montana Children's Home and Hospital project, Helena, MT) series 2005B.

The Rating Outlook is Stable. The bonds will be sold through negotiation by D.A. Davidson & Co. on or about March 16. Fitch also affirms the 'A+' rating and Stable Outlook on $30 million in outstanding authority debt.

While the bonds are secured by loan repayments made by the named hospitals as borrowers of the authority, the pledge is enhanced by the Montana Board of Investment's (the board) irrevocable and unconditional pledge to make up any deficiency in the bond debt service reserve fund. Fitch's rating is based on the board's obligation and its substantial resources available, totaling $881.1 million at June 30, 2004. A similar pledge enhances debt issued by the board itself, although the total amount of all board obligations is small relative to its sizable and secure available funds. The board also provides liquidity for $91.6 million of its own bonds, again holding adequate resources for this need. To date, the board has not made any reserve fund deposits for it's or the authority's programs, or for liquidity payments.

The security provided by the board's back-up pledge remains strong despite increases in debt issuance. This issue raises total authority debt backed by the board by about one-third, and board issuance has risen substantially, too, as state departments join local governments as borrowers. Also, the Montana Legislature has utilized an increasing amount of board resources for public and private loans, reducing the amount available to meet the debt service reserve fund make up pledge, if needed.

Nonetheless, the board's resources with which to meet its debt service reserve fund make-up pledges remain well in excess of the total bond par covered. The available funds consist of the Treasurer's Fund (the state's operating fund) and a portion of the Coal Severance Trust Fund (CST). The Treasurer's Fund totaled $441.2 million at June 30, 2004, and the CST $691.2 million, with $439.9 million of this available for debt service reserve replenishment if needed. While the board's available funds vary in amount throughout the year and over time, they remain well in excess of the amount of debt enhanced. All debt backed by a board pledge totals $148.1 million after this issuance, and consists of $91.6 million in board-issued bonds for its INTERCAP program bonds, which lends bond proceeds to state departments and local governments, $54.2 million in Montana Facility Finance Authority, and $2.3 million in other commitments.

About one-half of the available funds come from the CST; the trust's corpus cannot be invaded without approval by three-quarters of the state legislature. However, Montana's legislature has allocated an increasing amount of the trust assets for investment in economic development, water projects, and other targeted programs. These allocations have reduced the amount of CST funds available to meet the board's obligations to the current $439.9 million from a high of $544.5 million in fiscal 2000. Also, the legislature has changed the distribution of interest income from the fund, with only one-quarter currently remaining in the CST. While resources available to the board continue to provide excellent debt service protection, additional actions to restrict more CST assets could reduce overall credit strength.