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MOODY'S RELEASES SPECIAL REPORT ON IOWA TRUST FUND

 MOODY'S RELEASES SPECIAL REPORT ON IOWA TRUST FUND
 NEW YORK, Feb. 13 /PRNewswire/ -- Moody's Investors Service released


today a report on the Iowa Trust Fund and the effects of Iowa Trust's involvement with Institutional Treasury Management (ITM). Iowa Trust could lose up to $74 million of money that it had invested with ITM, a firm that had its assets frozen by a federal district court this past December as a result of an SEC investigation into possible securities fraud.
 The report indicates that Iowa Trust appears likely to recover at least some of its assets. However, if only a small amount is recovered, some municipalities that invested with Iowa Trust Fund will be forced to nearly deplete their general reserves. Those most vulnerable to having their general fund balances substantially reduced if they do not get most of their investment back are the cities of Marshalltown, Webster, Marion; and Scott, Webster, Black Hawk and Muscatine Counties.
 The report points out that five cities -- Marshalltown, Webster, West Liberty, Milford and Altoona -- had debt service reserve funds frozen as a result of ITM's problems. Thus far, Marshalltown is the only one that has entirely replenished its reserve. Webster, West Liberty and Altoona have either partially replenished their respective debt service reserves or intend to begin doing so shortly. Milford has no plans to replenish its debt service reserve, as city officials have reportedly been advised by their auditors that their monies should not yet be considered lost. In Moody's view, Milford's decision is not prudent.
 The report notes that Marshalltown and Polk County are two Iowa Trust Fund participants that could potentially lose more than their respective shares in the fund. Shortly before ITM's assets were frozen, Marshalltown (which had its own account with ITM in addition to its investment through the Iowa Trust Fund) withdrew all monies invested in its own name from ITM, and Polk County withdrew most of its investment from Iowa Trust. The risk of being required to reimburse the Iowa Trust Fund is greater for Marshalltown, because it appears that funds in Iowa Trust's ITM account may have been moved to Marshalltown's account just before the freeze. Polk County's risk is contingent in nature. If the Iowa Trust Fund does not recover its monies from other sources, the fund will likely attempt to get Polk County to give back a large share of the amount the county had previously withdrawn.
 Moody's has 41 ratings on the debt of 22 municipalities participating in the Iowa Trust pool. Thus far, the general obligation bond rating of only one fund participant -- the city of Marshalltown -- has been lowered as a result of its involvement with ITM. On Feb. 4, 1992, Moody's lowered Marshalltown's rating to 'A' from 'Aa.' Any further rating actions related to ITM will depend on the outcome of ongoing litigation involving the ownership of the assets in question, as well as on how well each entity is able to compensate for the near-term unavailability and possible long-term loss of funds.
 To date, no rated Iowa Trust participant appears to have had cash flow needs that could not be met in the near term with internal borrowing, external borrowing and/or a deferral of selected expenditures. In addition, recently enacted legislation gives the Iowa Finance Authority the ability to issue bonds to provide cash flow assistance to those municipalities that need it.
 -0- 2/13/92
 /CONTACT: Diana Roswick, vice president/assistant director, 212-553-0491, or James Burr, vice president/assistant director, 212-553-0471, both of Moody's/ CO: Iowa Trust Fund ST: Iowa IN: FIN SU: RTG


JT-OS -- NY095 -- 9928 02/13/92 16:31 EST
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Date:Feb 13, 1992
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