Fitch Rates NY Muni Bond Bank Agency $16MM Bonds 'A'.

Business Editors

NEW YORK--(BUSINESS WIRE)--March 7, 2003

Fitch Ratings assigns the rating of 'A' to the approximately $16 million State of New York Municipal Bond Bank Agency (MBBA) special school deficit program revenue bonds, 2003 series A (Enlarged City School District of the City of Troy (the district)). The bonds are to sell via negotiation with First Albany Corp. on or about March 18. Pursuant to New York law, bond proceeds will finance the liquidation of the district's large accumulated general fund deficit.

Debt service is expected to be covered by semiannual payments of the district, which it is obligated to make as an appropriation from available funds pursuant to statute and a special school deficit program agreement with MBBA. However, the rating of 'A' is based on MBBA's statutory duty to cause the state comptroller to withhold state school aid otherwise payable to the district in the event it fails to make a required payment 15 days prior to a scheduled bond payment.

State school aid potentially available for withholding is expected to exceed $40 million annually in fiscal 2003, which covers maximum annual debt service (MADS) on the district's outstanding long-term bonds and estimated annual payments to the MBBA by a wide margin. A debt service reserve fund equal to the maximum semiannual principal and interest payment on the bonds provides additional comfort, especially considering the fact that New York's various school aid intercept statutes may provide protection for holders of both long-term and short-term district obligations, as well as retirement system and other payments. The district's obligations to MBBA are not backed by its full faith and credit, unlike that of other bonds both in New York and nationally that are enhanced by school aid intercept statutes.

Fitch's ratings of school aid intercept bonds, including this rating, generally recognize school districts' strong timely payment history, state support and oversight, and remote likelihood of bankruptcy or insolvency. However, it is worth noting that, while Fitch does not rate the credit quality of the Enlarged City School District of the City of Troy, data presented in offering documents indicate that the district's finances are among the weakest of American school districts. In New York, the state has intervened on several occasions to monitor and assist financially challenged school districts, as it has in this case. The state has acted to increase oversight of the district's finances and established the special school deficit program after weak financial controls led to steep deterioration of the district's finances in fiscal years 2001 and 2002. Following the hiring of new financial officials and tough revenue and expenditure decisions, the district's financial position reportedly is stabilizing. As noted in offering documents and as is the case with most such bonds nationally, there can be no assurance of the viability of the school aid intercept mechanism in the unlikely event of a district bankruptcy.

School aid intercept ratings are correlated with state general obligation ratings. In some cases, they may move upward or downward together. Fitch rates New York State's general obligations 'AA' (Rating Watch Negative).