Fitch Upgrades Leoni Township, MI Sewer Bnds to 'A+'

CHICAGO--(BUSINESS WIRE)--Aug. 26, 2003--Fitch Ratings upgrades Leoni Township, MI's outstanding $2.3 million sewage disposal system bonds to 'A+' from 'A'. The upgrade is based on improved coverage levels, strong financial liquidity, sufficient system capacity, and a growing customer base. The rating also reflects minimal capital improvements over the next few years as management recently upgraded and expanded the sewer system's (the system) facilities to address demand of the surrounding communities. The Rating Outlook is Stable.

Located in southeastern Michigan, Leoni Township lies 10 miles northeast of Jackson and 35 miles west of Ann Arbor on Interstate 94. Since 1996, the system has experienced 6.8% average annual growth in demand, largely attributable to the township's expanding economy as residential development spread westward from Detroit. Over the past few years the system's sewage treatment services have broaden to include two additional townships. Management expects more moderate growth in the near future.

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Management projects the system's 2.6 million gallons per day (MGD) capacity to be sufficient to meet the demand of the growing service area for the next ten years as average customer usage totaling 1.4 MGD. In addition, the system is currently compliant with all state and federal environmental regulations.

The system's revenue bond debt service coverage is strong with pledged revenues providing 2.1x and 2x coverage of debt service in fiscal 2002 and unaudited 2003, respectively. Given the financial stability of the system, minimal capital needs, and periodic rate increases, coverage should remain at these levels over the next five years. In addition, revenue growth is projected to average 2.9% annually slightly outpacing 2.1% annual growth in expenditures.

Legal provisions for the sewage system bonds consist of a 1.1 times (x) rate covenant on all senior and junior lien debt, and an additional bonds test that requires the adjusted net system revenues to maintain 1.15x maximum debt service coverage on outstanding senior and junior lien bonds and any additional debt. A pledge of the net revenues of the system secures the bonds.