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Fitch: U.S. Public Finance Downgrades Slightly Down During 3Q'10; Negative Trends to Persist

NEW YORK, Nov 12, 2010 (BUSINESS WIRE) -- Fitch Ratings notes that during the third quarter of 2010 and for the seventh consecutive quarter, U.S. public finance rating downgrades outnumbered upgrades.

This trend in public finance ratings is expected to continue as Negative Rating Outlooks exceeded Positive Rating Outlooks (4.8:1) and Negative Rating Watches still outweighed Positive Rating Watches (5.0:1) in the third quarter of 2010.

However, a majority of the actual rating actions, 74.9%, during the third quarter were affirmations, with no change in Rating Outlook or Rating Watch status. Furthermore, 90.1% of ratings had a Stable Rating Outlook at the end of the third quarter.

During 3Q'10, Fitch's U.S. public finance group downgraded 32 ratings totaling $18.8 billion in par value while upgrading 25 ratings with a par value of $18.1 billion. The downgrade to upgrade ratio by rating changes was 1.3:1, decreased from 1.6 in the prior quarter. On a par value basis, the downgrade to upgrade ratio of 1.04:1 was down from the prior quarter ratio of 2.5:1.

The number of ratings with Negative Outlooks at the end of 3Q'10 increased to 251 from 246. The number of ratings with Positive Outlooks decreased to 52 from 58. The increase in the ratio of Negative Outlooks to Positive Outlooks to 4.8:1 from 4.2:1 marked the tenth consecutive quarter that this ratio has increased.

There were 25 ratings on Rating Watch Negative versus 19 in the prior quarter, and only five on Rating Watch Positive at the end of 3Q'10, unchanged from the prior quarter.

The bulk of the downgrades by par value occurred in the tax-backed sector, the largest of which was the downgrade of Chicago general obligation bonds to 'AA' from 'AA+'. The bulk of the upgrades by par value occurred in the public power sector, which had 10 upgrades and no downgrades in 3Q'10; the largest of these by par value was the upgrade of California Department of Water Resources' power supply revenue bonds to 'AA-' from 'A+'.

The full report 'U.S. Public Finance Rating Actions for Third Quarter 2010' summarizes these rating actions by sector and can be found at 'www.fitchratings.com'.

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

Applicable Criteria and Related Research: U.S. Public Finance Rating Actions for Third-Quarter 2010 http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=571865 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 DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE '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.

SOURCE: Fitch Ratings CONTACT: Fitch Ratings Sarah Repucci, +1-212-908-0726 Senior Director Fitch, Inc. One State Street Plaza New York, NY 10004 or Eric Friedland, +1-212-908-0632 Managing Director or Media Relations: Cindy Stoller, +1-212-908-0526 (New York) cindy.stoller@fitchratings.com Copyright Business Wire 2010 -0- KEYWORD: United States

North America

New York SUBJECT CODE: Bond/Stock Rating