Fitch Ratings Upgrs $650MM Covanta Solid Waste Bonds.

Business Editors

Fitch Ratings has upgraded to 'B' from 'CC' selected solid waste project bonds associated with Covanta Energy Corp. (Covanta). These ratings remain on Ratings Watch Evolving. While the final reorganization of Covanta will not be defined and completed for some time, various orders recently issued by the bankruptcy court and actions by Covanta support the expectation that debt service on the Fitch rated solid waste-to-energy bonds listed below will continue to be paid on a timely basis. Heightened operating risks at the solid waste projects attributable to Covanta's impaired financial condition continue, but are commensurate with 'B' level credit quality. 'B' ratings indicate highly speculative credit quality, with significant credit risk present and a limited margin of safety remaining. Financial commitments are currently being met; however, capacity for continued payment is contingent upon a sustained, favorable business and economic environment.

Fitch Ratings will continue its monitoring and review of the court filings and other information associated with the April 1, 2002 bankruptcy filing of Covanta and various of its wholly owned subsidiaries. On May 15, the bankruptcy court issued its final order on the debtor-in-possession (DIP) financing, following earlier final orders on the centralized cash management system and the use of cash collateral, among other orders. These orders enable Covanta and certain of its debtor subsidiaries included in the Chapter 11 filing, to continue to pay debt service and operating costs related to the solid waste projects, as well as pay critical vendors, and receive operating fees.

There are 20 non-debtor subsidiaries of Covanta that act as guarantors for the DIP financing. The Haverhill project, unlike those of the other Fitch rated bonds listed below, has not been included in the Chapter 11 filing. However, it has been named as a non-debtor subsidiary guarantor. Cash generated from the Haverhill project remains included in the consolidated cash management system and, together with other Haverhill project assets, may be encumbered by junior liens granted as security for the DIP guarantee. If the DIP guarantee were to be called on, the sufficiency of Haverhill's cash flow to service project related debt could be pressured.

As the bankruptcy process continues, there may be other motions from the creditors or the debtors that could be detrimental to holders of Fitch rated waste-to-energy projects. However, to date, the actions of the debtors, which have been approved by the bankruptcy court, have continued the legal mechanism and protections contained in the project bond documents. Fitch Ratings will continue to monitor the situation and adjust our ratings as warranted.

Accordingly, the bonds of the following projects are upgraded to 'B' from 'CC' and remain on Ratings Watch Evolving. Fitch's ratings of municipal bonds backed by waste-to-energy projects owned or leased by subsidiaries of Covanta are:

--Bristol Resource Recovery Facility Operating Committee, CT solid waste revenue bonds (Ogden Martin Systems of Bristol, Inc. Project), 1995 series, unenhanced rating upgraded to 'B' from 'CC' and remains on - Rating Watch Evolving;

--Massachusetts Industrial Finance Agency and Massachusetts Development Finance Agency resource recovery revenue bonds (Ogden Haverhill Project), unenhanced rating upgraded to 'B' from 'CC' and remains on - Rating Watch Evolving;

--Onondaga County Resource Recovery Agency, NY project revenue bonds, series 1992, unenhanced rating upgraded to 'B' from 'CC' and remains on - Rating Watch Evolving;

--Suffolk County Industrial Development Agency, NY solid waste disposal facility revenue bonds (Ogden Martin Systems of Huntington Limited Partnership Recovery Facility), series 1999 (insured: Ambac), unenhanced rating upgraded to 'B' from 'CC' and remains on - Rating Watch Evolving;

--Union County Utilities Authority, NJ solid waste landfill taxable revenue bonds, series 1998 (insured: Ambac), unenhanced rating upgraded to 'B' from 'CC' and remains on - Rating Watch Evolving;

--Union County Utilities Authority, NJ solid waste facility senior lease revenue bonds, series 1998 A & B (Ogden Martin Systems of Union, Inc. Lessee), unenhanced rating upgraded to 'B' from CC' and remains on - Rating Watch Evolving;

--Union County Utilities Authority, NJ solid waste facility senior lease revenue bonds (Ogden Martin Systems of Union, Inc. Lessee) series 1998A (insured: Ambac), unenhanced rating upgraded to 'B' from 'CC' and remains on - Rating Watch Evolving; and

--Union County Utilities Authority, NJ solid waste facilities subordinate lease revenue bonds, series 1998A (Ogden Martin Systems of Union, Inc. Lessee) (insured: Ambac), unenhanced rating upgraded to 'B' from 'CC' and remains on - Rating Watch Evolving

Additionally, the ratings for approximately $520 million of outstanding municipal bonds for projects serviced by Covanta and secured by payment obligations of certain public entities have been affirmed, and removed from ratings watch negative but with a negative outlook. The negative outlook reflects the possible operating and other risks that could result from Covanta's bankruptcy filing:

--Lee County, FL solid waste system refunding revenue bonds, series 2001 (insured: MBIA), unenhanced rating of 'A-' affirmed with a negative outlook and removed from ratings watch negative;

--Lee County, FL solid waste system revenue bonds, series 1995 (insured: MBIA), unenhanced rating of 'A-' affirmed with a negative outlook and removed from ratings watch negative.

--Northeast Maryland Waste Disposal Authority, MD solid waste revenue bonds (Montgomery County Resource Recovery Project), series 1993 A and B, unenhanced rating of 'AA-' affirmed with a negative outlook and removed from Rating Watch Negative.

For more information, see Fitch Ratings' earlier releases on this matter, available at the agency's web site: www.fitchratings.com: Fitch Ratings monitoring Municipal Solid Waste Debt in connection with Covanta Chapter 11 filing, April 11, 2002 and April 2, 2002; Fitch Ratings Dwngrs $650MM Covanta Muni Solid Waste Debt to 'CC' from 'CCC' (March 1, 2002); Fitch Ratings Dwngrs $650MM Covanta Muni Solid Waste Debt' (Feb. 28, 2002); Fitch Ratings Lowers $650MM Muni Solid Waste Debt to 'B' (Jan. 30, 2002); 'Fitch Ratings Removes Rtg Wtch Neg On Montgomery Cnty MD Sol Wst Rev Bnds (Feb. 6, 2002); and Fitch Monitoring Solid Waste Bonds Connected With Covanta (Jan. 25, 2002).