Fitch Raises Rating Outlook on State GO Bonds from Negative to Stable

         Treasurer Kennedy Says Action is Important First Step to Regaining “A+” Bond Rating

BATON ROUGE, LA – Fitch announced today it has raised the rating outlook on approximately $2.4 billion in outstanding state general obligation bonds from “negative” to “stable” and has reaffirmed the bonds’ “A” rating. The rating outlook indicates the direction the state’s general obligation bond rating will likely move over a one to two-year period.

“This improvement is an important first step to regaining the ‘A+’ bond rating the state had before the hurricanes, and this action places us in a position to seek an upgrade next year,” said State Treasurer John Kennedy.

In a news release today, Fitch said the rating outlook improvement “reflects the significant positive financial developments in Louisiana since the state’s rating was downgraded to ‘A’ from ‘A+’ in December 2005 following hurricanes Katrina and Rita. The state has acted promptly to ensure balanced operations, maintained sizable financial balances, realized exceptionally strong fiscal 2006 revenue collections (bolstered by high oil and gas and sales tax revenues), and secured substantial federal assistance, including for levee repair and an extensive housing program.”

Fitch said the state was in a strong financial position because of a solid General Fund, a fully-funded Rainy Day Fund and $3.2 billion in trust funds. The rating agency also pointed out substantial federal relief from the Gulf Opportunity Zone Act of 2005 including $4.5 billion in second refundings of local and state debt and $7.9 billion in tax-exempt private activity bonds. Fitch also noted additional federal assistance including $985 million in community disaster loans for local government operating expenses and $200 million in Gulf Tax Credit Bonds (matched by the state) for local government debt assistance.

In a continued effort to restore Louisiana’s bond rating, members of the State Bond Commission held informational meetings with the three national rating agencies earlier this month in Baton Rouge and New Orleans. State officials plan to have follow-up meetings with the rating agencies early next year.

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