Fitch Upgr Detroit Economic Development Corp., Michigan To `A+'.

Business Editors

NEW YORK--(BUSINESS WIRE)--Aug. 13, 2001

Fitch has raised the rating, to `A+' from `A', on the Economic Development Corporation (EDC) of the City of Detroit, Michigan's $113.5 million resource recovery revenue refunding bonds, series 2001A (2001A bonds) and $3.5 million of taxable resource recovery revenue refunding bonds, series 2001B (2001B bonds). Fitch has also raised the rating, to `A+' from `A', on the similarly secured Greater Detroit Resource Recovery Authority, Michigan's (GDRRA) $455.3 million of outstanding resource recovery revenue bonds. The rating of `A+' is assigned to the current offering based upon (i) the constitutional and statutory strength of the City of Detroit's distributable state aid (DSA) payments; (ii) improved coverage margins of senior lien debt obligations of the EDC and GDRRA that are secured by DSA receipts; and (iii) the improved credit quality of the city (general obligation debt rated `A' by Fitch). The issuer is a public body and instrumentality of the city that promotes economic development and is governed by a Board of Directors, which is chaired by the Mayor of Detroit.

Dated the date of delivery, both series of bonds pay interest each May 1 and Nov. 1, beginning Nov. 1, 2001. The 2001A bonds mature serially May 1, 2002-2009; and the series 2001B bonds mature serially May 1, 2002-2005. Salomon Smith Barney will lead the negotiated underwriting which is expected to price the series 2001A and 2001B issues Aug. 15, 2001 with delivery currently anticipated on Sept. 15, 2001. The bonds will refund the EDC's currently outstanding resource recovery revenue bonds, series 1991A, and the resource recovery revenue refunding bonds, series 1992.

The EDC and GDRRA debt issues are secured by both the limited general obligation pledge of the City of Detroit (the city) and the city's DSA. The supplemental tipping fees paid by the city to meet certain basic installment sale obligations under the installment sales contracts rank equally with other limited tax general obligations of the city. Nevertheless, the pledge of the city's distributable state aid, paid by the state treasurer directly to a trustee exclusively for DSA debt obligations, strengthens the credit quality of these bonds.

The DSA and money paid to the trustee are subject to a statutory lien that is superior to all other liens, except to pay DSA debt obligations. The municipality cannot use the DSA funds held by the trustee for any other purpose than paying DSA debt obligations. In its supplemental full faith and credit general obligation contract with GDRRA, the city has pledged further that it will direct the state aid trustee to use all DSA payable to the city for the benefit of outstanding and future DSA debt holders. By state statute (Act 97), the State of Michigan has covenanted to DSA bondholders that it will not impair DSA payments by creating a lien, diverting, withholding or deducting from DSA revenues used for DSA obligations.

The predictability of state revenue sharing payments is grounded in constitutional and statutory requirements. Under the state constitution, the state distributes a 15% share from two-thirds of its retail sales taxes to local governments on a per capita basis, and by state statute, distributes an additional 21.3% share of these sales taxes is distributed to local governments. The constitution also requires that the state must pay at least 41% of statewide revenues to local governments. Under the new revenue sharing legislation (Act 532) signed by the Governor in January 1999, the city will receive a fixed amount of $333.9 million annually through June 30, 2007. Consequently, debt service coverage for the EDC and other senior DSA obligations averages over 5.1 times (x) through 2007. State law requires 2x coverage on DSA obligations, but the city's commitment under the supplemental service contract mandates at least 3x coverage. The city expects no additional DSA debt issuance.