Fitch Rts South Carolina Trans Inf Bank Rev Bonds`A'.

Business Editors

NEW YORK--(BUSINESS WIRE)--Oct. 13, 2000

Fitch has assigned an `A' rating to the $270.3 million South Carolina Transportation Infrastructure Bank (TIB) revenue bonds, series 2000A. The bonds are expected to be sold through a competitive bid the week of Oct. 30.

The underlying ratings on the TIB's outstanding $265.4 million series 1998A and $308.9 million series 1999A revenue bonds are also affirmed at `A'. The series 1998A and 1999A bonds are rated `AAA' based on guarantees of scheduled debt service payment under insurance policies with MBIA Insurance Corporation and Ambac Assurance Corporation respectively, both of whose insurer financial strength is rated `AAA' by Fitch. The series 2000A bonds are also expected to be insured. The series 2000A bonds are being issued to finance a portion of project costs for Horry, Beaufort and York counties, and the Upstate GRID project; to reimburse the TIB for moneys advanced for these projects; to fund the debt service reserve to meet its requirement; and to pay costs of issuance and municipal insurance premium.

The `A' rating reflects both the stable quality of the revenue streams pledged to the TIB, as well as a weak additional bonds' test which allows little margin should bonds be issued to the maximum allowed. The rating also recognizes the state's commitment to the bank and the needed large transportation projects it is financing, as well as the flexibility to tailor construction spending and bond issuance to the available revenues. Pledged revenues, consisting of system payments, series payments, and transfers and interest earnings from the revenue stabilization fund, are estimated to provide about 2.2 times (x) coverage of gross debt service on the bank's outstanding and currently offered bonds in fiscal 2001; coverage at its lowest point is 1.63x in 2017. Comparable coverage as defined under the indenture, which nets out series payments from pledged revenues and gross debt service resulting in higher ratios, is 11.63x and 2.17x, respectively.

System payments comprise truck registration fees, which totaled $59.0 million in fiscal 2000. Since these fees are collected biennially, a revenue stabilization fund serves to smooth the biennial collections. It is important to note that the pledge of truck registration fees for the payment of TIB revenue bonds is junior and subordinate to the pledge of these fees for the payment of state general obligation highway bonds of which about $326 million are outstanding. However, given that the sources of revenue for the payment of state highway bonds excluding truck registration fees provide over 6.00x coverage on the maximum allowable annual debt service for state highway bonds permitted by the South Carolina constitution, the second lien is not a material concern.

Series payments constitute four different loan repayments related to Horry County, the entity whose projects received the bulk of proceeds from the bank's first and second bond issues. Two of the series payments are generated by Horry County's voted hospitality fee. The other two series payments, which were pledged in July 2000, represent South Carolina Department of Transportation (SCDOT) commitments for Horry County's Conway Bypass project to be paid from federal highway reimbursement funds. As added protection, the TIB has the statutory right to intercept state aid to Horry County in the event the county does not make its payments.

With the series 2000A issuance, $854 million in revenue bonds will be outstanding as part of the planned $2.0 billion in TIB funding. The bank plans to issue another $750 million, including $350 million in state general obligation bonds. The general obligation bonds would be separately secured by an annual contribution set by the TIB Board of an amount not to exceed one-cent a gallon of the state tax on gasoline. Future series payments are expected to be derived from other participating borrowers. Full issuance to the additional bonds' test of 1.35x coverage (under the indenture) is ultimately expected, providing little margin as the test inflates coverage by using `net' debt service, a calculation which reduces the annual debt service by the amount of the series payments and earnings on the debt service fund.

As part of the third series revenue bond resolution, an amendment has been made to the debt service requirement in the master revenue bond resolution. To better comply with IRS arbitrage regulations, the maximum annual gross debt service requirement has been changed to the more standard -- least of: maximum annual debt service, 125% of the average annual debt service requirement of the bonds, or 10% of the proceeds of the bonds.

Lastly, the TIB has applied to the United States Department of Transportation under the Transportation Infrastructure Finance and Innovation Act of 1998 for a $215 million loan for the Cooper River Bridges project for the City of Charleston. It is expected that this loan would be secured by a junior lien on the pledged revenues of the TIB and that adequate total debt service coverage will be maintained to protect the credit quality of the senior bonds. The TIFIA program would extend up to 33% of project cost in this case in the form of a direct loan, allow for the capitalization of interest for up to five years and for loan repayment over a 35 year period.

The TIB was created by an Act of the South Carolina general assembly in 1997. The purpose of the Act was to focus greater attention on larger transportation projects in the State thereby allowing the SCDOT to devote resources to other transportation projects. The TIB selects and assists in financing major qualified projects in excess of $100 million by providing loans and other forms of financing assistance.

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.