Fitch Upgr Cameron County Int'l Toll Bridge System Bonds.

Business Editors

NEW YORK--(BUSINESS WIRE)--Aug. 10, 2000

Fitch upgrades the underlying rating on the Cameron County International Toll Bridge System's outstanding $6.1 million international toll bridge system revenue bonds, series 1997 and $8.0 million international toll bridge system revenue bonds, series 1998 to `A' from `A-'.

Fitch also upgrades the underlying rating on the outstanding $9.7 million international toll bridge system combination tax and revenue refunding bonds, series 1996A and $3.3 million international toll bridge system combination tax and revenue certificates of obligation, series 1996B to `A+' from `A'. These issues are rated `AAA' based on guarantees of scheduled debt service payment under insurance policies with Financial Guaranty Insurance Corporation (series 1996A & 1996B), and MBIA Insurance Corporation (series 1997 and 1998), both of whose financial strength is rated `AAA' by Fitch. The revenue bonds and the combination tax and revenue instruments are on parity and are backed by a pledge of the net revenues of the bridge system. The combination tax and revenue instruments are direct general obligations of Cameron County and, therefore, carry the higher underlying rating of the county, which was also recently upgraded. For further information on the tax-backed instruments refer to the press release on Cameron County, TX dated August 9, 2000.

The rating upgrade reflects the strong operating surpluses of the bridge system. The system has generated a 4.0% average annual rate of traffic growth between 1992 and 1999. During the same period, toll revenues have grown at an average annual rate of 12.0%, more than doubling from $4.0 million to $8.9 million, due to traffic growth and a $0.25 toll increase for passenger vehicles in 1997. While net revenues also doubled, the high debt service coverage level (on all debt) of 6.90 times (x) in 1992 dropped to 4.96x in 1999 with the addition of $17.6 million in revenue and tax-backed debt between 1996 and 1998 for the construction of a new bridge.

The upgrade also reflects the mitigation of two major risks facing the system over the past few years -- the completion of construction of the system's new Los Tomates International Bridge (also known as the Veterans Bridge) and initial traffic demand meeting expectations. Since the bridge opened in April 1999, two months behind schedule, traffic has grown to meet projections, in part because of the requirement that all truck traffic in that corridor use the new bridge. This requirement diverted traffic to this system from the main competing facility. Revenues from all bridges are exceeding forecast primarily because of a $0.10 toll increase on motorcycles and a $0.15 toll increase on automobiles that went into effect on Oct. 1, 1999. While ramp-up of traffic is still a risk, it is a minor risk to bondholders given the tremendous surpluses of the system. Net revenues in 1999 provide 2.79x coverage on maximum annual debt service (revenue and tax-backed) of $2.4 million in 2007. The primary risk of poorer performance is borne by Cameron County and the other participating municipalities that share in the bridge system's surpluses, as described below.

While Cameron County is the sole owner of the U.S. half of all three bridges, other local municipalities participated in the two newer bridges by sharing in the initial operating deficits with the benefit of also sharing in potential surpluses. Surpluses from the Gateway Bridge, the oldest and largest revenue generator of this system since it became operational in 1966, are 100% that of Cameron County and are all available for the County's other governmental needs. The Free Trade Bridge at Los Indios, which generated its first surpluses in 1999 after six years of operation, has a governing interlocal agreement that calls for surpluses, over and above 140% of the annual debt service requirement and any pay-go capital expenditures, to be distributed 50% to Cameron County and 25% each to the cities of Harlingen and San Benito. The new Los Tomates Bridge has a governing interlocal agreement that calls for surpluses, over and above 140% of the annual debt service requirement and after reimbursement of prior year losses to the bridge system, to be distributed 50% to Cameron County and 50% to the City of Brownsville. Like other bridge systems, this system has toll rates in excess of what is needed to support operating and debt service requirements, thereby providing Cameron County and the other municipalities the ability to take advantage of its relative inelasticity to toll increases in order to provide contributions for their other governmental operations. However, the bond order (indenture) provides ample protection for bondholders, ensuring all system needs are met prior to distributions. The transfer of financial margin also means that reserve levels rarely grow beyond required levels. Therefore, from a credit standpoint the focus is on cashflow liquidity rather than on liquidity from reserves.

The bridge system's modest additional capital needs and strong support from other governments are positive credit considerations. The system's five-year capital plan (2000- 2004) is approximately $10 million, all for renewal and replacement expenditures of the bridge system and funded from surplus revenues. As is evidenced by the local participation, the bridge system enjoys strong support from other government agencies, including the Texas Department of Transportation, which financed a major overpass at the new bridge.

The primary risks facing the bridge system continue to be competition from the Brownsville and Matamoros Bridge, a privately owned rail and road crossing, and the sensitivity of traffic to economic and political changes. However, given the surplus levels and the current debt structure, Fitch does not view these risks as significant.

Fitch is an international rating agency that provides global capital market investors with the highest quality ratings and research. Dual headquartered in New York and London with a major office in Chicago, Fitch rates entities in 75 countries and has some 1,100 employees in more than 40 local offices worldwide. The agency, which is a combination of Fitch IBCA and Duff & Phelps Credit Rating Co., provides ratings for Financial Institutions, Insurance, Corporates, Structured Finance, Sovereigns and Public Finance Markets worldwide.