Fitch Downgrades BellSouth Telecommunications Senior Notes

Business Wire, Oct 29, 2002

Business Editors

CHICAGO--(BUSINESS WIRE)--Oct. 29, 2002

BellSouth Telecommunications Inc.'s sale and leaseback, $43.8 million senior notes are downgraded to 'A ' from 'AA-' by Fitch Ratings. The rating downgrade was prompted by Fitch's downgrade of BellSouth Telecommunications Inc.'s corporate rating to 'A ' from 'AA-'. In addition to the downgrade, Fitch affirms the BellSouth Telecommunications Inc.'s sale and leaseback, $14.3 million discount notes at 'A '.

The certificates are secured by the lease on a 660,000 square foot office building in Birmingham, AL. BellSouth Telecommunications Inc. (BST) has a bondable lease for 20 years on the property. Rent payments on the lease cease after ten years and are sufficient to pay the obligations of the senior notes. The rating of the senior notes corresponds to the rating of BST, which was downgraded yesterday by Fitch. BST's debt is guaranteed by BellSouth Corp, which is also rated 'A ' by Fitch.

The discount notes will accrete to a value of $45 million, which are due in conjunction with BellSouth's lease expiration in 2018. The discount notes are guaranteed by a residual value insurance policy, provided by RVI America. The rating of the discount notes corresponds directly to the rating of RVI America, which was affirmed at 'A ' in July 2002 by Fitch.