Fitch Rates Toledo-Lucas County Port Auth, Ohio $4MM Bond Fund Revs 'BBB+'; Rating Watch Negative

Business Wire, Oct 29, 2007

CHICAGO -- Fitch Ratings assigns a 'BBB ' rating to the Toledo-Lucas County Port Authority, OH (the authority) Northwest Ohio Bond Fund (the bond fund), $4,010,000 million taxable development revenue bonds, series 2007A (Associated Hygienic Products LLC Project), which will be offered by Robert W. Baird & Co. Inc. during the week of Nov. 11. The rating on the series 2007A bonds, as well as the 'BBB ' ratings on the bond fund's $84.5 million outstanding development revenue bonds, remain on Rating Watch Negative, reflecting the Chapter 11 bankruptcy filing by the pool's third largest borrower, Dana Corp., on March 3, 2006.

The bond funds' bonds issued on behalf of Dana Corp., which account for 7.4% of the portfolio ($6.5 million), are secured by lease payments that are backed by a mortgage lien and security interest on Dana's research and development facility and equipment (the project), located in Lucas County. To date, Dana Corp has remained current on its monthly lease payments. On Sept. 5, 2007, the bankruptcy court approved a proposed settlement agreement between Dana and the authority, in which the authority has agreed to a secured claim against the project and Dana has agreed to continue to make lease payments that are sufficient to pay the debt service on the related series 2002B bonds issued by the authority.

The authority established the bond fund in 1988 to advance economic development efforts in the region. The bond fund currently has 26 participants, with bonds outstanding totaling $88.5 million. The authority is currently the program's largest obligor and represents 11.5% of the total portfolio.

In addition to lease or loan payments by the pool participants, all of the bond fund's bonds are equally and ratably secured by funds held in reserves, which equal $28.5 million or 32% of the principal of all outstanding bonds. The bond fund's reserves comprise: primary reserves, funded by each borrower equal to approximately 10% of bond principal; program reserves, which include a $6.5 million cash contribution from the authority and a $10 million irrevocable letter of credit from Fifth Third Bank that expires Nov. 15, 2016, subject to extension; and additional reserves specific to certain series of bonds. Shortfalls in bond payments due to loan or lease defaults must be made up first from the defaulting borrowers' primary reserves, then from program reserves, and finally from any remaining primary reserves.

The 2007A bond proceeds will fund a loan to Associated Hygienic Products LLC (AHP) to purchase machinery and equipment, which will be used to manufacture disposable diapers and disposable incontinence products. The bonds are secured by loan payments and a first security interest in the financed machinery and equipment. The 2007A bond issues are further secured by the primary and program reserves mentioned above.

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