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PICA BONDS 'BBB+,' PHILADELPHIA GENERAL OBLIGATIONS UPGRADED TO 'BB' BY FITCH -- FITCH FINANCIAL WIRE --

 PICA BONDS 'BBB+,' PHILADELPHIA GENERAL OBLIGATIONS
 UPGRADED TO 'BB' BY FITCH -- FITCH FINANCIAL WIRE --
 NEW YORK, May 20 /PRNewswire/ -- Philadelphia's general obligation bonds are raised to 'BB' from 'B' by Fitch. The Pennsylvania Intergovernmental Cooperation Authority's (PICA) new issue of $473.8 million special tax revenue bonds (City of Philadelphia Funding Program), Series of 1992, is rated 'BBB+.' The new bonds are expected to be offered the week of June 1 with Merrill Lynch & Co. and Smith Barney, Harris Upham & Co.
 Philadelphia and PICA are intimately related, but security for their respective bonds is separate, as is the credit quality of each entity's debt. PICA's credit trend is stable; Philadelphia's trend is revised to uncertain from declining.
 The city's rating upgrade is a result of the apparent realization of all key parties that the financial problems are severe and that actions must be taken to resolve the crisis. With the creation and operation of PICA, its interaction with the city, and its bonding of Philadelphia's deficit, imminent risk of default is no longer present. Philadelphia is taking its first steps toward resumption of fiscal normalcy.
 The creation and approval of a five-year plan has been accomplished, with needed political approvals readily achieved. The authority is selling bonds that will fulfill deficit reduction and capital purposes, thus easing the crisis tone that characterized Philadelphia during recent years. The ability to accomplish the plan is still uncertain, as is it extraordinarily dependent on managerial and operational changes. In addition, it is not yet clear how all of the city's labor negotiations will be resolved and much of the plan depends on changes in historic labor practices. Debt levels remain high and will increase further with this issue.
 The rating on the PICA bonds reflects the strength of the pledged revenues (primarily the resident wage tax) as well as the legal protections insulating the revenue stream from the city and the commonwealth of Pennsylvania. Although PICA's bonding authority has no dollar cap, its deficit bonding powers expire in two and one-half years. The authority's oversight powers are limited in terms of levels and types of involvement, but ultimate adherence to the five year plan can be enforced by PICA through its power to withhold sizable sums of moneys from the city. The base from which the wage tax is generated has shown consistent, although modest, growth that can be expected to continue.
 -0- 5/20/92
 /CONTACT: Colleen Woodell of Fitch, 212-908-0507/ CO: Pennsylvania Intergovernmental Cooperation Authority ST: Pennsylvania IN: SU: RTG


CK -- NY061 -- 6252 05/20/92 12:45 EDT
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Publication:PR Newswire
Date:May 20, 1992
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