Fitch Rates NJEDA $1.1B School Facilities Construction Ref 2008 Series V Bonds

NEW YORK--(BUSINESS WIRE)--Fitch Ratings assigns an 'AAA/F1+'rating to the New Jersey Economic Development Authority (NJEDA) School Facilities Construction Refunding bonds, 2008 series V-2 and V-4, and 'AA+/F1+' to 2008 series V-1, V-3 and V-5. The ratings are based on the direct-pay letters of credit ('LOCs') supporting the bonds and the application of Fitch's joint probability methodology. The long-term ratings assigned to the bonds are based jointly on the underlying rating assigned to the bonds (currently rated 'A+' by Fitch), and the support provided by the LOCs issued by Allied Irish Banks, plc (series V-1), Dexia Credit Local (series V-2), Bank of Nova Scotia (series V-3), Bank of America, NA (series V-4), Wachovia Bank, National Association (series V-5) (the 'bank or banks,') securing the bonds. The short-term 'F1+' ratings are based solely on the LOCs. The banks are rated: Allied Irish ('AA-/F1+'), Dexia Credit Local ('AA+/F1+), Bank of Nova Scotia ('AA-/F1+'), Bank of America ('AA/F1+'), Wachovia Bank ('AA-/F1+'). The long-term 'AA' rating of Bank of America is on Negative Watch as of Mar. 7, 2008. For more information on the underlying credit, please refer to Kenneth Weinstein's press release published on Apr. 22, 2008.

The long-term ratings are based on Fitch's methodology which considers the joint probability of the failure of both a rated obligor and a bank LOC provider. The methodology results in a rating that is up to two notches higher than the stronger of the two credits if the following conditions are met: (1) both entities have a rating of 'A' or higher; (2) the transaction is structured such that payments from both the municipal issuer and the bank are in the flow of funds and both entities would have to fail to perform before the bonds defaulted; and (3) the credit of the bank and the rated obligor have no more than a medium degree of correlation; in this instance there is a low degree of correlation. Fitch has determined a low degree of correlation which results in a rating of 'AAA/F1+' for 2008 series V-2 and V-4, and 'AA+/F1+' for 2008 series V-1, V-3 and V-5. If either the underlying bond rating or a bank were downgraded to 'A-' or lower, the joint probability could no longer be applied, and the long-term rating for the sub-series would then be adjusted to the higher of the bank rating and the underlying bond rating.

The banks are obligated to make payments of principal of and interest on the bonds upon maturity and redemption, as well as purchase price for tendered bonds. The rating will expire upon the earliest of: (a) Apr. 29, 2011 (V-1, V-3, V-4), Apr. 29, 2013 (V-2), Apr. 29, 2009 (V-5), the initial stated expiration dates of the related LOCs, unless such dates are extended; (b) fifteen days following the bank's receipt of a trustee certificate that (i) no bonds are outstanding, (ii) all draws have been honored, or (iii) a substitute letter of credit has been issued; (c) twenty-five days following the trustee's receipt of a notice of an event of termination under the reimbursement agreement and directing a mandatory tender of the bonds; (d) earlier of (A) fifteen days following the date on which interest on all bonds have been converted to daily, fixed, flexible, term, or auction rate, or (B) the date the bank honors a draw on or after the conversion date. The LOCs provide full coverage of principal plus an amount equal to 50 days of interest at a maximum rate of 12% based on a year of 365 days, and purchase price for tendered bonds, while in the weekly rate mode.

The bonds initially bear interest at a weekly rate, but may be converted to a daily, flexible, long term, or auction rate. While bonds bear interest in the weekly rate mode, interest payments are on the first business day of each month, commencing June 1, 2008. Holders may tender their bonds on any business day, provided the remarketing agent is given at least seven calendar days' prior notice of the purchase. The bonds are subject to mandatory tender: (1) each mode change date; (2) upon substitution of the LOC; (3) the business day immediately following the last day of each flexible and term rate period; (4) the fifth business day prior to the LOC expiration date; (5) the date which is twenty days following the trustee's receipt of written notice from the bank of an event of termination under the reimbursement agreement, directing such mandatory tender; (6) the date specified by the trustee following receipt of notice from the bank that the LOC will not be reinstated following an interest draw, which date shall be a business day not more than five days after trustee's receipt of the notice; or (7) in daily or weekly rate mode, on any business day specified by the authority in a notice to the trustee, not less than twenty days after trustee receipt of such notice. Optional and mandatory redemption provisions also apply to the bonds. The Underwriter and Remarketing Agent for the bonds are UBS Securities LLC for V-1 through V-3, Banc of America Securities LLC for V-4, and JPMorgan & Co. for V-5. The sale is expected to be on or about April 30, 2008.

The 2008 series V Bonds are being issued to currently or advance refund, and redeem certain of the Authority's School Facilities Construction Bonds, which bonds were originally issued to finance the costs of School Facilities Projects.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.