Municipal Bond Rating Changes—
A Notice to Municipal Bond Issuers and Other Market Participants

April 4, 2008

Since late 2007, the major rating agencies (Standard & Poor's, Moody's and Fitch) have been examining the ratings of bond insurance companies, particularly in light of those companies' exposure to subprime mortgage loans and investments. As a result, some of the rating agencies have placed certain insurers on a "ratings watch" or even downgraded their ratings. This has caused uncertainty in the market and has complicated the issuance of new bonds. In addition, the rating changes are important events for outstanding bonds, because they may trigger a contractual obligation of bond issuers (or in certain types of financings, borrowers or other "obligated persons" under the bonds) to file a "Material Event Notice" with national information repositories.

Most municipal bonds issued since 1996 are subject to Securities and Exchange Commission Rule 15c2-12, which requires the bond issuer to enter into a "continuing disclosure" undertaking or agreement at the time the bonds are issued. In this undertaking or agreement, the issuer (or other obligated person) agrees to provide regular updated financial information to the marketplace, as well as to file a "Material Event Notice" if certain listed events occur. One of these events is a change in the bond rating, including the insured rating. Note that some issuers or other obligated persons may have already retained a "dissemination agent" to assist in complying with the continuing disclosure undertaking.

We recommend that you review the continuing disclosure documents for any bonds that you may have outstanding (located in the transcript for each bond issue). That document includes information on filing Material Event Notices. The issuer or other obligated person likely has a contractual obligation to file a Material Event Notice if the bonds are:

Insured by ACA Financial Guaranty Corp. and rated by Standard & Poor's
Insured by Ambac Assurance Corporation and rated by Fitch
Insured by Financial Guaranty Insurance Corporation (FGIC) and rated by Standard & Poor's, Fitch or Moody's
Insured by XL Capital Assurance (XLCA) and rated by Standard & Poor's, Fitch or Moody's
Insured by CIFG and rated by Standard & Poor's, Moody's or Fitch
Insured by MBIA and rated by Fitch

The following chart summarizes the recent ratings changes (since mid-December 2007) applicable to the nine major municipal bond insurers. The new, lower ratings are highlighted in bold.

	Previous Ratings			Current Ratings (1)
Insurance Company	S&P	Moody's	Fitch	S&P	Moody's	Fitch

Insurers with Rating Changes Since Mid-December 2007:

ACA	A	n/a	n/a	CCC (2)	n/a	n/a
Ambac	AAA	Aaa	AAA	AAA	Aaa	AA (3)
XLCA	AAA	Aaa	AAA	A- (4)	A3 (4)	BB (4)
FGIC	AAA	Aaa	AAA	BB (5)	Baa3 (5)	BBB (5)
CIFG	AAA	Aaa	AAA	A+ (6)	A1 (6)	A- (6)
MBIA	AAA	Aaa	AAA	AAA	Aaa	AA (7)

Insurers with No Rating Changes Since Mid-December 2007:

Assured	AAA	Aaa	AAA	AAA	Aaa	AAA
FSA	AAA	Aaa	AAA	AAA	Aaa	AAA
Radian	AA	Aa3	A+	AA	Aa3	A+

(1) Note that the current ratings of the bond insurers do not necessarily reflect the current ratings on a particular bond issue insured by the bond insurer. If a particular bond issue has an underlying rating which is higher than the new rating of the bond insurer which insured those bonds, the higher underlying rating will now be the rating on the bonds. For this reason, all issuers should check the current ratings on their insured bonds before they file any Material Event Notice.

(2) S&P downgraded ACA to "CCC" on December 19, 2007; however, on January 11, 2008, S&P withdrew its ratings on all ACA-insured bonds. Accordingly, any outstanding bonds insured by ACA are now either non-rated bonds or, if such bonds had a separate underlying rating (e.g., "BBB"), such bonds now carry the underlying rating.

(3) Fitch downgraded Ambac on January 18, 2008.

(4) Fitch downgraded XCLA on January 24, 2008 to "A," and further downgraded XLCA on March 26, 2008 to "BB." Moody's downgraded XLCA on February 7, 2008. S&P downgraded XLCA on February 25, 2008.

(5) Fitch downgraded FGIC on January 30, 2008 to "AA," and further downgraded FGIC on March 27, 2008 to "BBB." S&P downgraded FGIC on January 31, 2008 to "AA," further downgraded FGIC on February 25, 2008 to "A," and further downgraded FGIC on March 28, 2008, to "BB." Moody's downgraded FGIC on February 14, 2008 to "A3," and further downgraded FGIC on March 31, 2008 to "Baa3."

(6) Moody's downgraded CIFG on March 6, 2008. Fitch downgraded CIFG on March 7, 2008. S&P downgraded CIFG on March 12, 2008.

(7) Fitch downgraded MBIA on April 4, 2008.

The changes described above continue to occur at a rapid pace. Some of the insurers have been placed on "ratings watch" or "negative outlook," indicating that additional rating changes could occur in the near future. If you have any questions regarding these recent events, the ratings on your bonds or this Client Advisory, do not hesitate to contact your dissemination agent (if applicable), general counsel, investment banker, financial advisor or Sherman & Howard.

Public Finance Department
303-299-8403
publicfinance@shermanhoward.com

Sherman & Howard has prepared this advisory to provide general information on recent legal development that may be of interest. This advisory does not provide legal advice for any specific situation. This does not create an attorney-client relationship between any reader and the Firm. If you want legal advice on a specific situation, you must speak with one of our lawyers and reach an express agreement for legal representation.

Municipal Bond Rating Changes—A Notice to Municipal Bond Issuers and Other Market Participants

Municipal Bond Rating Changes—
A Notice to Municipal Bond Issuers and Other Market Participants