Fitch Rates New Hampshire Municipal Bond Bank Rev Bonds 'AAA'

Business Wire, July 7, 2005

CHICAGO -- Fitch Ratings assigns an 'AA' rating to approximately $50 million New Hampshire Municipal Bond Bank 2005 series D nonguaranteed bonds (2005 General Bond Resolution). The Rating Outlook is Positive. The bonds are scheduled to sell via negotiation led by CitiGroup, Inc. on July 13. The New Hampshire Municipal Bond Bank (bond bank, or NHMBB) will loan the 2005D proceeds to a local school district, Bedford school district, for classroom construction and facility improvements. Fitch also affirms the bond bank's 'AAA' rating on approximately $873 million of outstanding nonguaranteed bonds (1978 General Bond Resolution). The Rating Outlook is Stable

Beginning with the series 2005D bonds, NHMBB has created a start-up loan pool and a new bond resolution, under which future nonguaranteed bonds are expected to be issued to fund loans for local entities. The existing 1978 General Resolution will remain open for additional bond issues; however, NHMBB anticipates that it will only be used for future bond refundings that would generate economic savings. Although the 2005 bond resolution is structured similarly to the 1978 resolution, the new resolution updates certain standard provisions and authorizes the bond bank to use a surety or other credit facility to fund its required debt service reserve.

The 'AA' rating with a Positive Outlook for the 2005 resolution is based on the strong legal provisions which mirror those in the 1978 resolution, the high credit quality of the Bedford School district, the initial borrower, and NHMBB's successful development and management of existing loan pools. The bonds are secured by general obligation backed loan repayments by Bedford school district and a program debt service reserve fund. Additional enhancement is provided by a state-aid intercept and a state moral obligation make-up provision. Fitch believes that, as new parity bonds are issued under the 2005 resolution over the next year, to lend to municipal borrowers, this start-up pool structure will develop and grow in credit quality. Currently, most of New Hampshire's eligible municipalities use the bond bank as their primary borrowing vehicle because it offers local government borrowers the lowest cost of capital.

A reserve for all parity debt, funded by bond proceeds at the least of 10% of bond par, 125% of average annual debt service or maximum annual debt service, is available to make up shortfalls that could potentially occur due to any missed repayments. Additional credit enhancement is provided by a state intercept, whereby, in the event the borrower or future borrowers default on a loan repayment, the bond bank has the ability to intercept any state funds payable to the borrower. An additional layer of support is a moral obligation of the state, albeit not a legal requirement, to replenish the debt service reserve if it falls below its minimum specified level. Neither the intercept nor the moral obligation has ever been utilized to repay bonds under the 1978 resolution, because no borrower has defaulted on a repayment since the bond bank began operations in 1977.

The 'AAA' rating on the outstanding nonguaranteed bonds issued under the 1978 resolution is based on significant coverage from multiple layers of security and the bond bank's sound management of municipal loan programs. Under the 1978 resolution, the loan portfolio is diversified, with approximately 200 borrowers consisting of various cities, towns, counties, school districts, and other local government units throughout the state. All loans are backed by the borrowers' general obligation pledge. The bond bank's reserve fund under the 1978 resolution is also strong, allowing 24.7% borrower loan defaults for four consecutive years with no action taken by the state to replenish the reserve fund. A loan repayment shortfall this severe is consistent with what Fitch would expect to occur in an 'AAA' stress scenario, given the quality of the bond bank's loan pool.

Fitch's rating definitions are available on the agency's public web site, www.fitchratings.com. Published ratings, criteria and methodologies, and relevant policies and procedures are also available from this site, at all times. This document will remain on the public site for seven days.