Fitch Rates NJ Transit Corp Certificates'A'.

Business Editors

NEW YORK--(BUSINESS WIRE)--Sept. 15, 2000

Fitch assigns an 'A' rating to the $704,795,000 certificates of participation (series 2000B), relating to a Master Lease Agreement of the New Jersey Transit Corporation (payable solely from certain Federal Transit Administration

grants). The certificates are scheduled to price through negotiation the week of Oct. 2, 2000, through a syndicate headed by Merrill Lynch. The underlying rating on New Jersey Transit Corporation's (NJT) outstanding $151.5 million series 1999A and $234.1 million series 2000A certificates of participation (COPs) is affirmed at `A'. The scheduled payment of debt service on the series 2000B certificates is expected to be guaranteed under an insurance policy. This represents NJT's third certificate offering under this program. NJT is the first agency within the U.S. to use the quasi-securitization of federal transportation assistance for transit purposes (in this case for the purchase of buses and electric locomotives).

NJT has a limited obligation to make Basic Lease Payments solely from Federal Transit Administration Section 5307 formula program funds. Basic Lease Payments essentially mirror scheduled principal and interest payments on the COPs. Federal transit funds are the sole source of pledged revenue to the certificate holders.

As expected, strong coverage of the certificates from annually apportioned federal funds under the two prior offerings is substantially reduced with this issuance towards the minimum allowed under the additional certificates test levels designed by Fitch. Under the first test, additional certificates may be issued if average annual revenues for the current authorization of federal transportation aid provide 1.35 times (x) aggregate maximum annual debt service on outstanding and new certificates. Under the second test, average annual revenues for the most recent three federal fiscal years must provide 1.20x coverage of maximum annual debt service on outstanding and new certificates. Current projections indicate the availability of approximately $100 million in future borrowing capacity through fiscal year 2016. Formula funds allocated to NJT range from $144.7 million in federal fiscal year (FFY) 1999 to $203.0 million in FFY2003. With the series 1999A, 2000A and 2000B certificates, maximum annual debt service will reach approximately $116 million per year, a significant jump from $38 million prior to this issuance.

A supplement to the Master Lease Purchase Agreement will be executed at time of delivery between NJT as Lessee and the Apris Group, Ltd. as Lessor, in order to facilitate the leaseback of the equipment purchases. Further supplements to the master lease will be entered into with any additional certificate issuances, and will specify the basic lease requirement (principal and interest schedule) for each COP series. This assignment creates a bankruptcy remote enough structure for the limited purposes of this program.

Under the Trust Agreement, holders of the equipment purchase certificates of participation will have a proportionate interest in the basic lease payment. Supplemental trust agreements will accompany each equipment purchase certificate issuance. The indenture establishes the New Jersey Transit Equipment Trust Fund, which includes accounts for the lease payment, capitalized interest, certificate redemption, and equipment acquisition.

The 'A' rating is also based on the sufficiency of Federal Transit Fund reimbursements to meet lease payment requirements. Funding for transit includes discretionary funds which are allocated by project, and formula funds which are allocated according to an urbanized area's population and transit service provided. Approval by the FTA of a grant commitment creates a contract obligation on the part of the FTA.

The transaction is strengthened by the expected low variability in the level of federal funding during the current authorization period through FFY2003. Fitch assigns an extremely low probability of no future federal transportation assistance authorization beyond FFY2003, a low probability of significant changes in funding levels to the State of New Jersey, and a low-to-moderate risk of significant changes in the allocation of federal transportation dollars between highway and transit programs.

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.