Michigan State University -MI- Bonds Rated `AA/F1+' By Fitch IBCA.

Business Editors

NEW YORK--(BUSINESS WIRE)--April 10, 2000

The $110 million Board of Trustees of Michigan State University general revenue bonds, series 2000A (floating rate bonds) are rated `AA/F1+' by Fitch IBCA. In addition, Fitch IBCA affirms its `AA' rating on the university's outstanding series 1998A-1 and affirms the `AA/F1+' rating on the series 1998A-2 bonds. The series 2000A bonds are scheduled to be sold in two tranches. The first tranche of approximately $61,165,000 will be sold during the week of April 18 through negotiation by Lehman Brothers. The second tranche of bonds will be sold approximately one year later.

The short-term `F1+' rating is based on the liquidity support of a standby bond purchase agreement (SBPA) provided by Dexia Credit Local de France. The SBPA provides for payment of purchase price of tendered bonds and is sized to cover the $61.165 million principal amount of the first tranche of bonds plus 35 days of interest calculated at a rate of 15% based on a year of 365 days. The SBPA will expire on April 18, 2001 unless extended or earlier terminated pursuant to its terms. Lehman Brothers is the remarketing agent for the bonds.

The first tranche of the series 2000A bonds will be issued in the weekly rate mode, but may be converted to a daily, commercial paper, term, fixed or SAVRS rate mode. While the bonds bear interest in a daily or weekly mode, holders have the option to tender their bonds on any business day with prior notice. The bonds are subject to mandatory tender upon interest mode conversion dates, upon substitution, expiration or termination of the SBPA and upon the decision of the board to voluntarily terminate the SBPA. Proceeds of the initial tranche, together with approximately $86 million in available university funds, will be used to fund construction of a Biomedical and Physical Sciences Center, a parking ramp, improvements to athletic facilities, and various other capital projects.

Michigan State University's (MSU) long-term `AA' rating reflects positive operating results, increasing enrollment and demonstrated support from the State of Michigan. Over the past five fiscal years, annual unrestricted current fund (UCF) surpluses have trended positively, improving from 5.9% in 1995 to 7.1% in 1999. Consistent increases in state appropriations have allowed MSU to adopt a tuition guarantee resolution, limiting tuition increases to the projected rate of inflation. MSU's ability to offer competitive tuition rates, combined with its reputation as a highly respected educational research institution, has resulted in solid increases in undergraduate applications and enrollment during the past five academic years, with increases of 15.1% and 8.4%, respectively. Increased applicants have allowed greater selectivity. In 1995, 81.9% of the applicants were accepted while 71.1% were accepted in 1999. With the number of high school graduates in the state expected to increase slightly over the next 10 years, MSU expects to maintain enrollment at the current level but to increase the quality and diversity of students.

The short-term `F1+' rating is supported by significant unrestricted and highly liquid reserves and the SBPA. As of Feb. 29, 2000, MSU had $192.9 million in cash and short term investments that are available on a daily basis. These funds represent approximately 1.75 times (x) the amount of anticipated variable-rate demand bond (VRDB) exposure. MSU also has $51.9 million of series 1998A-2 floating rate bonds outstanding and provides internal liquidity support for those bonds. MSU plans to replace the internal liquidity within three months of the series 2000A bond sale with a liquidity facility provided by Dexia Credit Local de France.

Areas of concern include MSU's concentrated dependence on the demographics and economy of the State of Michigan. In 1999, 85% of the students were from Michigan and 34.5% of the total UCF revenues were state of Michigan appropriations.

Founded in 1855, MSU was the nation's first land-grant university, and served as the prototype for 69 land-grant institutions later established under the Morrill Act of 1862. Through its 14 degree-granting colleges, MSU provides undergraduate, graduate, and professional education in more than 200 academic majors to more than 43,000 students.