Fitch Assigns Initial Rtg to Metro Nashville & Davidson Cnty, TN's Tax Revs; Downgrs GOs to 'AA-'

NEW YORK--(Business Wire)--
Fitch Ratings assigns an initial rating to the following Convention Center
Authority of the Metropolitan Government of Nashville and Davidson County,
Tennessee (the authority) bonds:

--Approximately $11.7 million tourism tax revenue bonds, series 2010A-1 'A+';

--Approximately $191.1 million tourism tax revenue bonds federally taxable,
series 2010A-2 (Build America Bonds - direct payment) 'A+';

--Approximately $16.8 million subordinate tourism tax revenue bonds, series
2010B-1 'A+';

--Approximately $413.8 million subordinate tourism tax revenue bonds federally
taxable, series 2010B-2 (build America bonds - direct payment) 'A+'.

The Rating Outlook is Stable.

In addition, Fitch takes the following action on the Metropolitan Government of
Nashville and Davidson County, Tennessee (Metro) as part of its continuous
surveillance effort:

--approximately $1.6 billion general obligation (GO) bonds, downgraded to 'AA-'
from 'AA';

--approximately $71 million district energy system (DES) bonds downgraded to
'A+' from 'AA-'.

Fitch has removed the Rating Watch Negative and assigned a Stable Rating
Outlook.

Fitch will recalibrate the ratings on the above referenced bonds on April 30,
2010 as described in the March 25, 2010 report 'Recalibration of U.S. Public
Finance Ratings', available on 'www.fitchratings.com'. At that time the ratings
will be revised as described below.

--The rating on the tourism tax revenue bonds will be revised to 'AA-' with a
Stable Outlook.

--The rating on the subordinate tourism tax revenue bonds will be revised to
'AA-' with a Stable Outlook.

--The rating on the GO bonds will be revised to 'AA' with a Stable Outlook.

--The rating on the DES bonds will be revised to 'AA-' with a Stable Outlook.

The bonds are expected to sell on April 13, 2010 via negotiation.

RATING RATIONALE:

--The series 2010A bonds are secured by tourism tax revenues that are comprised
of economically sensitive revenue streams. Future revenue collection assumptions
are untested for two of the revenue streams, which are heavily dependent upon
increased tourism activity largely attributable to the proposed convention
center.

--The series 2010B bonds have a subordinate pledge on the tourism tax revenues.
However, Metro has pledged non-tax revenues as security should the tourism tax
revenues prove insufficient, subject to a prior pledge of non-tax revenues for
payment of outstanding Sports Authority bonds.

--Legal provisions including the additional bonds test are adequate, and debt
service coverage is satisfactory for the rating level.

--Current planning does not include the construction of an adjacent hotel, which
has traditionally been a key aspect in the success of convention center
projects, although Metro officials are currently considering alternative hotel
funding scenarios.

--Metro's diverse, stable, economic base, anchored by health care, professional
and business services, and tourism, has solidified its position as a vital
regional center.

--The GO downgrade reflects the potential additional fiscal strains of the
debt-financed convention center upon an already pressured general fund beset by
slim reserve levels, significant long-term liabilities and constrained
revenue-raising ability.

KEY RATING DRIVERS:

--Convention project success as measured by increased tourism activity and
revenues will be critical to achieving anticipated coverage.

--Reserve levels should remain stable despite weakened revenues attributable to
the current economic softening. Continued limitations on Metro's ability to
raise revenues could hinder the ability to bolster revenues.

SECURITY:

The tourism tax revenue bonds series 2010A-1 and series 2010A-2 are secured by a
pledge of tourism tax revenues provided to the Authority by Metro, pursuant to
an interlocal agreement. The subordinate tourism tax revenue bonds series
2010B-1 and series 2010B-2 are secured by tourism tax revenues, subject to their
prior pledge for payment of the tourism tax revenue bonds. In the event of a
deficiency of pledged tourism tax revenue, the subordinate tourism tax revenue
bonds are secured by a pledge of non-tax revenues provided to the Authority by
Metro, pursuant to an interlocal agreement. The GO bonds are payable from
Metro's full faith, credit, and taxing power. Metro has committed a debt service
reserve deficiency make-up subject to appropriation as security for the DES
bonds.

CREDIT SUMMARY:

Nashville is a leading visitor destination in the Tennessee market and an active
participant in the convention industry. The city was a destination for 11
million visitors last year, with one-third participating in conventions. The
planned Music City Center (MCC) is scheduled to open in 2013 and will replace
the existing Nashville Convention Center (NCC), offering 3.5 times as much event
space and shifting the marketing focus to larger events. Average pre-booked
attendance at the MCC is nearly 6,600 participants, more than double the average
NCC participation. The city currently has 24,600 hotel rooms, with nearly 1,100
additional rooms expected to open by 2013. Partly attributable to four newly
opened hotels since 2007, occupancy declined from 68% in 2007 to 59% in 2009,
although the average daily rate increased in 2008 and fell marginally in 2009 to
$99.80. Construction of a hotel adjacent to the convention center, which has
traditionally been a primary factor in the success of similar projects, is not
included in current plans, although Metro officials are considering various
funding scenarios.

The series 2010A bonds are secured by a pledge of six tourism tax revenues. Four
of the revenues streams already exist: hotel/motel taxes; room occupancy taxes;
airport ground transportation taxes; and rental car revenue. The remaining two
revenues are contingent upon increased tourism activity generated by the
convention center and the tourism development zone in which it is located. The
series 2010B bonds have a subordinate pledge on the above tourism tax revenues.
Non-tax revenues are pledged should the tourism tax revenues prove insufficient,
subject to a prior pledge for Sports Authority bonds. Tourism tax revenues are
provided to the Authority by Metro, pursuant to an interlocal agreement wherein
Metro authorizes the issuer to pledge its rights under the agreement and the
tourism and non-tax revenues as security for the bonds. Under an indenture, the
Authority has pledged to a trustee all of its rights, titles, and interest in
the trust estates, including the right to receive revenues. Each series has a
separate debt service reserve fund (DSRF), equal to the standard three-pronged
test and fully funded from bond proceeds. Should tourism tax revenues prove
insufficient to meet the debt service for the series 2010B bonds, the city will
utilize the DSRF prior to calling upon non-tax revenues.

Utilizing conservative assumptions, the series 2010A bonds are projected to
achieve solid 1.75 times (x) coverage based upon fiscal 2009 pledged revenues
for the four existing taxes. The additional bonds test requires that coverage
including that of the additional proposed bonds exceeds 1.5x maximum annual debt
service (MADS) for any consecutive 12 of the preceding 24 months. Coverage for
the series 2010B bonds based solely upon pledged tourism tax revenues is
projected at a slim 1.1x through fiscal 2019. Coverage calculations include a
deduction for any payments received related to Build America Bonds issuances,
which Fitch views with concern when coverage approaches 1.0x. A Fitch stress
test indicated that should the two new revenue streams fail to materialize,
coverage attributable solely to existing tourism tax revenues could fall to 0.9x
by fiscal 2013, necessitating the use of the DSRF and ultimately non-tax
revenues. The additional bonds test for the series 2010B bonds, excluding up to
$50 million of completion bonds, is a weak 1.1x MADS.

As a consolidated city and county government, Metro benefits from the
combination of resources from urban and suburban areas. Nashville has a broad
spectrum of economic sectors, including finance, health care, entertainment and
tourism, retail, manufacturing, services and agriculture. Metro's credit profile
is enhanced by the stability of its substantial government and education
employment. Fitch believes Metro's attractiveness as a tourist destination will
enhance the prospects of a planned downtown convention center; arguably, the
convention center will not suffer from a proposed $400 million expansion of the
Gaylord Opryland Hotel and Convention Center due to distinct targeted attendees
and locations. A proposed $250 million Medical Trade Center will likely
additionally benefit from the breadth of the area's substantial health care
sector. Nearly all wealth indicators outperform the state's and the nation's.
The January 2010 unemployment rate of 9.6% for Davidson County remains below
Tennessee's and the nation's, although the growth in the unemployment rate over
the past year has slightly outpaced that of the state and the country.

The 'AA-' rating on the GO bonds reflects the Metro's favorable overall economic
activity and diversification, narrow financial flexibility, and above-average
debt levels. Metro has operated in recent years within a narrow range of
reserves that hovers around its policy of maintaining reserves in each major
fund of at least 5% of the subsequent year's budget. The policy provides for
reserves that are below levels typical for an 'AA' category credit. Sizable
unfunded pension and OPEB liabilities relative to the operating profile, ongoing
although currently declining support of the hospital authority, and a voter
approved albeit potentially unconstitutional tax rate cap limit the government's
flexibility. While Fitch believes that the convention center may enhance
economic activity in Nashville's downtown, even the moderate amounts of general
fund support that appear possible for debt service and operations would
contribute to increased strain on the government's finances.

Applicable criteria available on Fitch's web site at www.fitchratings.com:

'Tax-Supported Rating Criteria,' dated Dec. 21, 2009.

'U.S. Local Government Tax-Supported Rating Criteria', dated Dec. 21, 2009.

Considerations for Taxable/Build America Bonds Investors

The following sector credit profile is provided as background for investors new
to the municipal market.

Local Government General Obligation Bonds:

The unlimited taxing power of most local government general obligation pledges
is the broadest security a U.S. local government can provide to the repayment of
its long-term borrowing, and therefore is the best indicator of its overall
credit quality. The average local government general obligation rating is 'AA-'
with approximately 56% rated at or above 'AA-' and 7% rated 'BBB+' or below. The
relatively high ratings reflect local governments' inherent strengths: the
authority to levy property taxes, nonpayment of which can result in property
foreclosures; additional taxing power that can include sales, utility, and
income taxes; and essentiality of and lack of competition for services provided
by local governments. Those with low investment-grade or below-investment-grade
ratings generally have a combination of a limited or highly volatile economic
base, high levels of long-term liabilities including debt and post-employment
benefits, and/or unusually limited financial flexibility.

Additional information is available at 'www.fitchratings.com'.

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS.
PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK:
HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING
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METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF
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Fitch Ratings
Barbara Ruth Rosenberg, +1-212-908-0731
Amy Laskey, +1-212-908-0568 (New York)
Media Relations:
Cindy Stoller, +1-212-908-0526 (New York)
cindy.stoller@fitchratings.com

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