Rating Agency Strategies

AFG has developed considerable experience working with the major national rating agencies. As a result of our experience advising more than one hundred clients each year to issue tax-exempt securities for a wide range of purposes, AFG has developed a clear understanding of the analytical methods utilized by Moody’s Investors Service, Standard & Poor’s Inc. and Fitch Ratings. Our professional staff is trained to conduct in-depth credit analyses comparable to the rating agencies so that both credit strengths and weaknesses can be identified by the issuer prior to the presentation of materials to rating analysts. This experience has been utilized effectively recently to improve the credit ratings assigned to several communities across the nation.

As a normal course of any financial advisory engagement, AFG professionals are called upon to meet with officials of our client, other professionals participating on the financing team, outside interests which may require a briefing on the details of a financing mechanism or program, rating analysts, investors and representatives of Letter of Credit Banks or bond insurers. The experience gained in completing over $12 billion of transactions in the past two years alone enables AFG to provide essential information to interested individuals in a timely and complete manner.

Over the past two years, AFG has submitted over 200 financings to the rating agencies for ratings. Of this number, approximately 60 of the issues were insured and another 20 were backed by credit enhancements in the form of letters of credit from major international banks. As a result of this experience, we have developed a very effective working relationship with Standard & Poor’s Corporation, Moody’s Investors Service and Fitch Ratings.

We will work closely with the rating agencies to fully understand their concerns and methodology and to design the issuer’s presentations, as described below, to specifically address each agency’s questions in a meaningful way. In addition, we maintain close personal contact with staff members at the rating agencies regarding their views of debt covenants, innovative financing techniques and unusual debt structures.

The following is a list of typical services AFG will provide in connection with the preparation of rating agency presentations:

• Provide Training to Issuer’s Board and Staff
• Provide Outline for Presentation
• Assist with the Collection of Data
• Recommend Presentation Format
• Conduct Rehearsal of Rating Presentation

AFG has provided service to many government entities to improve or maintain their credit ratings. A sample of our more recent New Jersey experience is described below.

Essex County, NJ
AFG specifically assisted the County of Essex in 2003 in maintaining its existing underlying credit rating with Moody’s Investors Service and Fitch Rating in light of difficult circumstances faced by the new administration of the County. AFG helped the executive and finance offices in clearly articulating the changes in their policy and long-term financial plan that were instrumental in maintaining these credit ratings.
In connection with a debt restructuring undertaken by the County through the Essex County Improvement Authority, the County was able to balance its budget by undertaking a significant tax increase and employing other budgetary measures. This restructuring allowed the County to “phase-in” incremental tax increases over a number of years to avoid a detrimental tax “shock” to its citizens and businesses. AFG assisted the County with preparing the financial analysis, preparing the ratings presentations and securing the confidence of the rating agencies that the plan carried a high probability of success. This presentation resulted in the respective rating agencies maintaining their existing underlying ratings on the County.

Camden County, New Jersey
Over the past several years, professionals at AFG have assisted the County of Camden with obtaining credit ratings from Moody’s Investors Service and Standard & Poor’s Ratings Group. The professionals with AFG prepared rating agency presentations for the County of Camden in the years 1996, 1997 and 2000. In all of the previously mentioned years, AFG was successful in securing the “A1” rating of the County from Moody’s Investors Service. In 1997, the County received an upgrade from “A-“ to “A” from Standard & Poor’s Ratings Group. The County once again received an upgrade from Standard & Poor’s Ratings Group in 2000. When the rating of “A” was upgraded to an “A+” due to the County’s expanding economic and tax base as well as enhanced financial controls and reporting procedures, which contributed to the County’s improved financial condition.

AFG was integral in the County’s success with the rating agencies. AFG coordinated the entire rating agency presentation process starting with the initial review of financial, economic & demographic information to preliminary conversations with the rating agencies to the completion of the final presentation and successful upgrade. Throughout the process our professionals participated in numerous meetings with County officials and staff members to better understand the strengths and weaknesses of the County. We supplied the rating agencies with preliminary information prior to the meeting and presentation and engaged in preliminary conversations with them so we were able to tailor our presentation to address the issues they felt were important. A major part of our presentation to the rating agencies included a detailed discussion on the City of Camden and the many projects being undertaken to help stimulate the economy. The presentation addressed the roles of Cooper’s Ferry Development Association, the Delaware River Port Authority, the State of New Jersey and the County of Camden in implementing various initiatives to revitalize the City of Camden. The presentation to the rating agencies concluded with a tour of the County and included an in-depth tour of the City of Camden due to its important role in the continued success of the County’s economy.

Delaware River Port Authority
AFG assisted the Delaware River Port Authority (“DRPA”) with reaffirming their underlying ratings from Moody’s Investors Service, Inc. for their senior lien revenue bonds (“A3”), second lien revenue bonds (“Baa1”) and subordinate lien debt (“Baa3”). The underlying ratings carry a stable outlook and reflect the DRPA’s fundamental strengths, including its well-established customer base, competitive operating position, and historically sound financial results, supported by a recently implemented toll rate increase.

AFG coordinated presentations to Moody’s Investors Service and Standard and Poor’s Ratings Group in connection with the issuance of its 2001 Port District Project A Bonds and 2001 Port District Project B Bonds were issued to (a) refund a portion of the outstanding 1999 Port District Project A Bonds for savings and (b) fund $30.0 million of eligible “Port District” projects. The 2001 Port District Project A & B Bonds were issued under an Indenture of Trust to be adopted by the DRPA that are subordinate to bonds issued under the 1998 Senior Indenture and on parity with bonds issued under the 1999 Port District Project Indenture.

Casino Reinvestment Development Authority
AFG assisted the Casino Reinvestment Development Authority with the security structure and credit rating presentation for two recent transactions. The first was a $90 million hotel room fee tax secured tax-exempt bond issue that was sold in October 2004 and the second was a $290 million parking fee and “Investment Alternative Tax” secured transaction sold in March of 2005. The hotel room fee transaction will be secured by a $3 per room (whether paid or provided complimentary) tax to be assessed upon each casino room starting in July of 2006 pursuant to recent legislation. The parking fee transaction is secured by: (i) and existing and forthcoming increase in the statutorily required charge assessed to vehicles that park in casino parking lots; (ii) a contractual additional parking charge assessed by the casinos; and (iii) a portion of certain casino’s previously required statutory obligation for a portion of their gross revenues. The parking fee transactions also efficiently refunded three prior bond issues existing under two senior indentures to allow the new bonds to avoid being significantly subordinated and potentially not being marketable. The financings were structured to provide near level annual debt service coverage of approximately 1.90 times and included a parity additional bonds test requiring a 1.50 times historic coverages on all future maximum annual debt service. AFG was instrumental in structuring the transaction and preparing the analyses to illustrate sensitivities in the coverage analyses. AFG also directed the rating agency presentations which yielded investment grade ratings for both transactions.

Princeton Township, Mercer County, New Jersey
Recently, the Township of Princeton (“Princeton”) underwent a permanent financing of their outstanding Bond Anticipation Notes which were issued to fund the construction of Princeton’s new municipal building (the “Project”). The permanent financing totaled $10.7 million and closed in September 2001. AFG worked with Princeton in the development of the rating agency strategy and presentations for the Project financing. AFG was successful in securing Princeton’s “Aaa” credit rating from Moody’s Investors Service (“Moody’s”) and achieving an upgrade in Princeton's credit rating from “AA+” to “AAA” from Standard & Poor’s Rating Group (“S & P”). Several months before the final presentations to the rating agencies, AFG furnished Moody’s and S & P with all necessary documentation they required to perform their preliminary evaluations on Princeton. AFG kept in constant contact with Moody’s and S & P to evaluate the important issues the rating agencies wanted to see addressed within the presentation. Working closely with Princeton’s staff, AFG collected data and information used within the presentation and developed an outline of talking points that the presentation should follow. Several working group meetings were held with staff members who were participating with the verbal presentation to the rating agencies. AFG guided and instructed the participants as to what needed to be emphasized during the presentation. While Princeton had minimal weaknesses, AFG structured the presentation to demonstrate that Princeton’s overall position was that of “AAA” indications.