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Fitch Rates $57.7MM Rhode Island Convention Center Auth Rfdg Revs 'AA-' Underlying

Business Wire, June 20, 2003

Business Editors

NEW YORK--(BUSINESS WIRE)--June 20, 2003

Fitch Ratings assigns an underlying 'AA-' rating to the Rhode Island Convention Center Authority's $57,710,000 refunding revenue bonds 2003, series A.

The bonds are expected to be insured by FSA, whose financial strength is rated 'AAA' by Fitch. The new bonds are expected for negotiation June 23 through UBS Financial Services Inc. and Carolan & Co., and will be due May 15, 2016-20; optional call details are yet to be determined. The bonds will be subject to special mandatory redemption at par at any time from sale of the project or proceeds from insurance or condemnation awards not applied to the repair, replacement or restoration of the facility. Bond proceeds will be used to provide a current refunding of $61.6 million 1993 series B bonds maturing May 15, 2020.

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The convention center authority was created in 1987 to construct, manage and operate a convention center and related facilities, including a hotel, parking facilities and office building, on a 7.7 acre site in downtown Providence. Construction was completed in 1993-94, the office space is reportedly fully leased, and the convention facility and hotel (Westin) represent a key factor in the city's downtown resurgence. The facilities are leased to the state and the authority manages them under a sublease agreement, contracting the actual facility management to third parties. The authority is governed by a nine-member board, with seven appointed by the governor and two by the mayor. The convention center authority is limited to $353 million bonds, with $39.6 million remaining available for issuance under the statutory cap.

Security for these bonds, on parity with $251.7 million outstanding convention center bonds, derives from lease rental payments made by the state, subject to annual appropriations although renewal is automatic upon appropriation. The rental payments are absolute and unconditional, not subject to abatement and are not dependent on state occupancy or use of the leased facilities. Additionally pledged is a first mortgage on the facility, and the debt service reserve fund. Although authority operations were impacted in fiscal 2002 by the economic downturn and the events of Sept. 11, 2001, the authority was able to continue its historic practice of refunding a portion of the debt service appropriations to the state in the amount of $1.7 million. The 2001 refunding issue helped, as will the current refunding for fiscal 2003, but the authority also acted to cut spending to a level 1.7% below actual fiscal 2001. For fiscal 2003, some $5.6 million of the $23.9 million debt service rental payment is expected to be refunded to the state.

As security is dependent on annual appropriations, the credit rests on the State of Rhode Island and Providence Plantations, whose general obligation bonds are rated 'AA' by Fitch. Rhode Island has always acted responsibly to protect its debt and financial positions, and has long demonstrated both willingness and ability to respond to changing conditions often as a result of its vulnerability to business cycles. Following the very weak period of the early 1990s through which surplus was sustained, in recent years the economy has grown and diversified. Rhode Island has experienced a comparatively mild economic impact from the current recession with essentially no employment losses although the lower level of capital gains realizations, options, and bonuses are affecting revenue collections but budgetary modifications have been made.

Additionally, the one-time revenues from the 2002 tobacco securitization also contributed to sustaining balances, and reserves remain at the statutory maximum of 3%. Tax collections through eleven months of fiscal 2003 were up 5.4%, slightly above the May revised 5.2% estimated gain, although tax and departmental receipts slightly lagged the annual estimate. This refunding does not alter the state's tax-supported debt level of approximately $1.3 billion or $1,240 per capita and 4% of personal income. The state continues its deliberate efforts to reduce its debt burden.

Business Services Industry

Fitch Rates $57.7MM Rhode Island Convention Center Auth Rfdg Revs 'AA-' Underlying

Business Wire, June 20, 2003

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