Fitch Rates Tennessee Local Development Authority's $53MM BANs 'F1+'

NEW YORK--(Business Wire)--
Fitch Ratings has assigned an 'F1+' rating to the Tennessee Local Development
Authority's (the authority) $52,845,000 state loan programs revenue bond
anticipation notes (BANs), 2009 series A. The new issue is expected to sell
competitively on or about June 3, 2009 and is due June 16, 2010. Issue proceeds,
along with other available funds, will principally retire outstanding BANs. In
addition, Fitch has affirmed the 'AA-' rating on the authority's $53 million
program revenue bonds. The Rating Outlook is Stable.

The 'F1+' short-term rating for the BANs reflects the credit of the authority's
local government loan programs and its ability to access the bond markets for
financing. While note interest is met from local loan repayments and
additionally enjoys the protection of the withholding of state-shared taxes,
note principal is secured essentially from proceeds of bonds or notes to be
issued. Although principal repayments from the localities are also pledged, such
repayments would be inadequate to meet maturing note principal in full. The
authority has demonstrated good market access over the past decade, with annual
note issuance in each year since 1982 and regular bond issues. The authority is
an agency of the state of Tennessee and its board incorporates the state funding
board, which includes the state's highest elected officials.

Loans are used by local governments to fund water and sewer utility
improvements. Numerous features support the programs' credit. Loan underwriting
standards are conservative. Committed local sources to pay loans provide at
least 1.10 times coverage of debt service. The loan agreements also include a
pledge of localities' allocations of state-shared taxes, including gas, sales,
investment income, and mixed drink taxes, as well as certain Tennessee Valley
Authority payments to the state. Withholding of these shared taxes would occur
upon failure of the borrower to make a required payment.

State law also provides funding, from any available source, of a trust fund
reserve equal to each borrowing locality's annual loan obligations less its
unobligated state shared taxes. Statute requires the governor to request an
appropriation to replenish any deficiency from the required reserve level. The
reserve currently approximates $3 million, although it could be drawn down to
about $200,000 and still comply with program requirements. Payments by local
units have always been made as scheduled, and there has been no need for
recourse to either the state-shared taxes or the statutory reserve.

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.

Fitch Ratings, New York
Laura Porter, +1-212-908-0575
Richard Raphael, +1-212-908-0506
Cindy Stoller, +1-212-908-0526 (Media Relations)
cindy.stoller@fitchratings.com

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