Fitch Revises Rtg on Industrial Dev Board of the Town of Chatom Gulf Opportunity 2007A to 'A/F1'

Business Wire,  May 30, 2008  

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NEW YORK -- Fitch Ratings will confirm the 'A' long-term rating and assign a short-term rating of 'F1' to the $50,000,000 Industrial Development Board of the Town of Chatom Gulf Opportunity Zone Bonds (Alabama Electric Cooperative Inc. Project) series 2007A. These rating actions are taken in connection with the conversion of the interest rate on the bonds from an auction rate to a semiannual mode, the provision of a standby purchase agreement (SPA) to provide liquidity support for the bonds, and the reoffering of the bonds. The long-term 'A' rating assigned to the bonds will continue to be based on the support of National Rural Utilities Cooperative Finance Corporation (CFC), which has unconditionally guaranteed scheduled payments of principal and interest. The short-term 'F1' rating will be based on the liquidity support of the SPA provided by CFC. Lehman Brothers will act as remarketing agent. The bonds are expected to be delivered on or about May 30, 2008.

The SPA provides for the payment of the purchase price of tendered bonds during the semiannual mode, and is sized to cover the principal portion of the purchase price and up to 180 days of interest at the maximum interest rate of 15%, based upon a year of 360 days. The SPA shall extend through the date that all bonds are paid or deemed paid in accordance with the Bond Indenture, or until all bonds bear interest at an Auction Rate or are Nonconvertible Rate bonds, whichever comes first; provided in each case, that the SPA shall not cease until all sums payable by or to the Standby Purchaser pursuant to the SPA have been paid in full. The short-term rating will expire upon any expiration or termination of the SPA. Under the SPA, CFC will agree to acquire the Converted bonds so tendered but not remarketed.

After the conversion and reoffering, the bonds may also be converted to weekly, flexible, annual, multi year or auction rate mode. While bonds bear interest in the semiannual rate mode, interest is payable semiannually on February 1st and August 1st of each year. During the semiannual rate-mode, holders have the option to tender their bonds only at the end of each six-month period. The bonds are subject to mandatory tender (1): during a commercial paper rate mode, on each repurchase date; (2) upon conversion of the interest rate; and (3) upon substitution of the SPA. Optional and mandatory redemption provisions also apply to the bonds pursuant to the terms of the authorizing documents.

Proceeds of the series 2007A bonds were used to finance a portion of the costs of certain environmental facilities serving the Charles R. Lowman power plant, a 556 mw coal-fired facility.

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.

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