Moody's Public Finance Department Rating News; MOODY'S REVISES CUYAHOGA COUNTY'S GENERAL OBLIGATION BOND RATING TO A1 FROM Aa; Significant Losses Stemming from the Termination of Its SAFE Investment Program Erode County's Previously Substantial Financial Margins

Business Wire, Jan 5, 1995

NEW YORK--(BUSINESS WIRE)--Jan. 4, 1995--Moody's Investors Service announced today that it has revised the rating on the county's general obligation bond rating to A1 from Aa. Last October, amid declining market values and growing concerns from local government investors in the county-run investment pool program, Cuyahoga County terminated its Secured Assets Fund Earnings (SAFE) Program and incurred investment losses equivalent to about 40% of its General Fund budget. The losses severely drained the county's once substantial cash reserves, thereby limiting its financial flexibility. The rating revision to A1 from Aa recognizes diminished margins of protection while also taking into account demonstrated management capability, including an appropriate response to the SAFE investment losses, and the broad economic strength of the county.

The county's payout in full of all investment pool participants and the assumption of investment losses totaling $114 million, has substantially depleted the sizable balances previously held in the county's operating funds. The county expects to restore its reserves within four years through a plan which appears reasonable. Management's ability and willingness to take further action in the event that current budgetary projections prove inaccurate are key to the successful implementation of the plan and are recognized in the rating assignment.

Risks to the financial plan include possible economic downturns and implementation of significant budgetary measures that must be incorporated on an annual basis. Additionally to be factored into the plan is that the county has maintained $137 million in leveraged reverse repurchase agreements in the investment portfolio that remain exposed to interest rates. Under present market conditions, the sale of these remaining investments would reportedly result in an additional loss. However, officials indicate that these funds are not anticipated to be needed to support operations during the four year restoration plan period. Moody's has also downgraded the rating to Baa1 from A on the Gateway Economic Development Corporation of Greater Cleveland's Subordinated Excise Tax Bonds (County Guaranty), Series 1990. This rating revision reflects not only the diminished financial resources and flexibility of the county, as the bonds are partially secured by a county guaranty, but also a lower debt service coverage now provided by the cigarette and alcohol tax revenues which also secure the bonds.

Moody's has confirmed the A rating on the county's Taxable Economic Development Fixed Rate Revenue Bonds, Series 1992A and Taxable Economic Development Revenue Bonds, Series 1994, which are still adequately secured by non-tax revenues of the county. Current projections indicate that maximum annual debt service coverage is satisfactory but below original estimates. While coverage remains adequate, the county's ability to realize its goal of restoring overall financial margins is key to the credit quality of these obligations.

The county's Series 1983 and Series 1993A (maturities dated October 1, 2008 to October 1, 2013) general obligation bonds are insured by MBIA and MBIA Corp. respectively and continue to carry the ratings of Aaa based upon the recognition of the insurers' claims-paying ability. Likewise, Gateway Economic Development Corporation of Greater Cleveland Senior Lien Excise Tax, Series 1990 A & B bonds are insured by FSA and rated Aaa reflecting FSA's claims-paying ability. Finally, the county's Taxable Economic Development Variable Rate Demand Revenue Bonds, Series 1992B are backed by a letter of credit with CIBC and are rated Aa3/VMIG1. -0- Amount of Debt Outstanding:

General Obligation Bonds: $146.214 million General Obligation Bonds (MBIA Insured), Series 1983: $16.7 million

General Obligation Bonds (MBIA Corp. Insured), Series 1993A maturities dated 10-1-2008 through 10-1-2013: $2.419 million

Taxable Economic Development Fixed Rate Revenue Bonds, Series 1992A: $35 million

Taxable Economic Development Variable Rate Demand Revenue Bonds, Series 1992B (LOC-CIBC): $76.375 million

Taxable Economic Development Revenue Bonds, Series 1994: $45 million

Gateway Economic Development Corporation of Greater Cleveland, Subordinate Excise Tax (Cuyahoga County Annual Guaranty) Series 1990: $37.010 million

Gateway Economic Development Corporation of Greater Cleveland Senior Lien Excise Tax, Series 1990A & B (FSA Insured): $76.375 million

CONTACT: Moody's Investors Service, New York

              Jeanne Wilson
              Assistant Vice President
              212-553-1690
              Angela T. Connelly
              Assistant Vice President
              212-553-7935