Fitch Rates Nelson Gallery Fndn (MO) $108.5MM VRDBs Ser 2008A 'AA/F1+'; Outlook Positive.

NEW YORK -- Fitch Ratings assigns a rating of 'AA/F1+' to the approximately $108,500,000 Missouri Development Finance Board, variable rate demand cultural facilities revenue bonds (The Nelson Gallery Foundation) series 2008A. The bonds are scheduled to sell on or about August 28 via negotiation. The long-term 'AA' rating is based on the support of the Nelson Gallery Foundation (NGF), while the short-term 'F1+' rating is based on the liquidity support of a standby bond purchase agreement (SBPA) to be provided by JPMorgan Chase Bank, N.A. Fitch also affirms the long-term 'AA' rating on NGF's outstanding cultural facilities revenue bonds, series 2001A and 2001B. An SBPA from JPMorgan Chase Bank, N.A. continues to support the short-term 'F1+' rating on the series 2001B bonds. Revenue bonds are an unsecured general obligation of NGF. Proceeds of the series 2008A bonds will be used to refund NGF's outstanding series 2001B bonds, finance gallery renovations in the Nelson-Atkins Museum of Art (the museum), and to pay various costs of issuance. The Rating Outlook is Positive.

In addition, Fitch affirms the implied general obligation rating of 'AAA/F1+' on the Hall Family Foundation (HFF) and the 'AAA'/'F1+' rating on NGF's outstanding series 2004A variable-rate cultural facilities revenue bonds. The long- and short-term ratings on the series 2004A bonds are based on an irrevocable donation agreement between HFF and NGF. Additional liquidity support is provided by an SBPA from JPMorgan Chase Bank, N.A. The Rating Outlook on the series 2004A bonds is Stable.

The 'AA' rating reflects NGF's strong liquidity; demonstrated fundraising ability; and an experienced management team which provides strong programmatic and financial oversight of the museum. In addition, the museum has a well-respected regional reputation and increasing visibility on a national scale. Credit concerns include NGF's high debt burden; its heavy reliance on investment income and philanthropy; and increased operating costs associated with the newly opened Bloch Building.

The Positive Rating Outlook reflects NGF's significant growth in available funds over the past several years due to improved investment performance and contribution levels. To the extent NGF can generate positive investment returns, maintain its current liquidity, and rebuild attendance levels, upward movement in the rating remains possible. While Fitch recognizes that NGF is facing a challenging investment environment, NGF has proven through a number of market cycles that its endowment can generate long-term appreciation. Furthermore, the newly opened Bloch Building may pose operational pressures to NGF in the near term due to the additional costs associated with the larger facility. However, this risk is partially mitigated by the museum's proactive management.

The 'F1+' rating on the bonds is based on the liquidity support of the SBPA provided by JPMorgan Chase Bank, N.A. The SBPA provides for the payment of the principal component of the purchase price and up to 35 days of interest calculated at a maximum rate of 12% per annum based on a year of 365 days, while the bonds bear interest in the weekly rate mode. The SBPA will expire on Aug. 27, 2009, unless extended or earlier terminated pursuant to its terms. The remarketing agent for the bonds is J.P. Morgan Securities Inc.

The bonds initially bear interest in the daily rate mode, but may be converted to bear interest at the weekly, commercial paper, long-term, or fixed rate. While the bonds bear interest in the daily rate mode, interest is payable on the first business day of each month, commencing Oct. 1, 2008. Holders of bonds bearing interest at a daily or weekly rate mode may tender their bonds for purchase with prior notice. The bonds are subject to a mandatory tender upon conversion of the interest rate modes, and upon the expiration, termination, or substitution of the SBPA. The bonds are also subject to mandatory and optional redemption.

NGF is a 501(c)(3) organization created in 1954 by the Trustees of the William Rockhill Nelson Trust for the purpose of acquiring works of art for exhibition to the public and to own and operate the museum, which is located in Kansas City, Missouri.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.