Fitch Ratings: Non-Rated Descriptive Report, Bernalillo County, New Mexico.

Business Editors

AUSTIN, Texas--(BUSINESS WIRE)--March 19, 2002

Fitch Ratings has released its non-rated descriptive report on Bernalillo County, New Mexico's $2,360,000 tax-exempt project revenue bonds (Alternative House, Inc. La Pasada Project), series 2002A and $140,000 taxable project revenue bonds (Alternative House, Inc. La Pasada Project), series 2002B. Fitch Rating's descriptive credit analysis provides analyses of significant credit factors and includes Fitch Rating's evaluation of the strengths and risks surrounding this credit. No request was made for a rating on this transaction, and Fitch Ratings did not review all information or complete all procedures necessary to reach a final credit rating. Generally, Fitch Ratings regards unenhanced debt issued with financial characteristics similar to the described facility as being below investment grade.

Serving as a conduit issuer, Bernalillo County, New Mexico (the county) is selling the current offering to fund a loan to Alternative House, Inc. (the corporation), a New Mexico non-profit corporation, which will use the proceeds to construct a 100-bed adult correctional facility in Albuquerque, New Mexico. The bonds are a special limited obligation of the county and are payable solely from the revenues under a loan agreement between the county and the corporation. The bonds do not constitute a debt or loan of credit or a full faith and credit or taxing power of the county. The bonds are scheduled to sell on March 19 via negotiation to Kirkpatrick Pettis, Inc.

Having secured a construction loan from New Mexico Bank and Trust, the corporation is nearing completion of the facility. Through this financing, the corporation will finance the construction of a replacement facility designed specifically as a community corrections facility. The new facility will replace an older motel that was adapted by the corporation to function as a corrections facility. Currently, the corporation's residents are comprised of referrals from the local Pretrial Services Agency of the U.S. District Court. Revenues generated by these placements comprised about 81% of the corporation's total revenues in fiscal 2000 and will be used to pay debt service to a trustee for the benefit of bondholders pursuant to a loan agreement between the corporation and the county.

Strengths include a 20-year history of providing adult correctional services, guaranteed per diem rates from an area federal agency, strong growth in referrals on a percentage basis, stable financial performance of the

corporation, a waiting list of placements, and an absence of competing facilities in the metropolitan area.

Risks include the lack of contracts guaranteeing a minimum number of residential placements. Furthermore, an existing contract establishing per diem rates expires in September 2003, although it is potentially renewable, and generally such contracts are not typically awarded for more than 3 - 5 years. Although a lack of a long-term contract does not categorically preclude investment grade consideration for correctional facilities, it is difficult to achieve without substantial mitigating circumstances. In addition, concentration risks exists as there is only one current provider of referrals, although a response to a request for proposal (RFP) with another federal agency is pending.