Fitch Rates Front Royal & Warren County IDA, Virginia's Lease Revs 'A'

Business Wire, Sept 1, 2004

WASHINGTON -- Fitch Ratings assigns an 'A' rating to the Industrial Development Authority (IDA) of the Town of Front Royal and the County of Warren, VA's $15 million lease revenue notes, series 2004A and $55 million lease revenue bonds, series 2004B. The notes and bonds are scheduled for a negotiated sale on Sept. 20, led by Davenport & Company, LLC and Morgan Keegan & Company, Inc. The notes mature on April 1, 2008 and the bonds mature April 1 2010-2035. The Rating Outlook is Stable.

The 'A' rating on the 2004A notes and 2004B bonds reflects the sound lease provisions and essentiality of the leased assets, as well as Warren County's (the county) underlying credit quality. The county's general obligation debt rating of 'A+' (assigned by Fitch on Aug. 20, 2004) reflects its sound financial position, increasing residential and commercial development opportunities due to its proximity to the Washington DC metro area and good transportation links, limited employment base, below average wealth indices, and significant school construction capital needs that will increase debt levels substantially.

Series 2004A notes will provide interim financing for school construction in anticipation of securing state literary fund loans upon the notes' maturity. The 2004B bond proceeds will be used to fund the construction of a new high school, the conversion of a middle school into a high school, and a fully funded debt service reserve. The completion of the two high school projects is anticipated for the school year 2007-2008. Additional school needs have been identified for fiscal 2008, at the earliest, with an estimated cost of $38 million.

Both the bonds and the notes are secured by lease rental payments, subject to annual appropriation, made by Warren County to the lessor (the IDA), which assigns and transfers its rights to a trustee (Wachovia Bank, National Association). In the event of non-appropriation or default, the trustee could take possession of the leased properties, and the county would be unable to use them for their essential governmental purposes. Lease rental payments are due to the trustee 30 days prior to the bond holder payment date, and are not subject to abatement. The notes and bonds do not carry a cross-default provision.