Fitch Affirms BellSouth's Sr. Notes and Downgrades Discount Notes

Business Wire, Sept 5, 2007

CHICAGO -- Fitch Ratings takes the following actions on BellSouth Telecommunications Inc. (BellSouth):

--$9.1 million sale and leaseback, senior notes affirmed at 'A'.

--$45 million sale and leaseback discount notes downgraded to 'A' from 'A '.

The senior notes are affirmed following Fitch's affirmation of BellSouth's senior unsecured debt at 'A' (for more information, see the press release dated July 16, 2007 on www.fitchratings.com). The discount notes are downgraded following Fitch's downgrade of RVI America which primarily reflects the challenging conditions in the residual value insurance market that have resulted in reduced overall premium volume in recent years. The rating of the discount notes is entirely dependent upon the rating of RVI, downgraded by Fitch on Aug. 8, 2007.

The certificates are secured by the lease on a 660,000 square foot office building in Birmingham, AL. BellSouth has a bondable lease for 20 years on the property. Rental payments for the first ten years are sufficient to pay the senior notes in full. Thus, the rating on the senior notes corresponds directly to the rating of BellSouth's corporate debt rating.

Rental payment ceases after the first ten years of the lease. Therefore, the discount notes will accrete to a total of $45 million, 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 (RVI). At the end of the lease term, the borrower has the option to sell the building for $45 million and if not, RVI will buy the building and retire the discount notes.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.