Fitch Downgrades Indiana Bond Bank Series 2007 A&B Special Program Gas Revs to ‘A’

Fitch Ratings has downgraded the ratings of the Indiana Bond Bank (IBB) special program gas revenue bonds, series 2007 A and B bonds to 'A' from 'A+'.

The rating action reflects Fitch's assessment of the credit quality of the various counterparties and enhancement providers, including the gas purchasing utilities - the City of Batesville, the Town of Lapel, and Citizens Gas - all of which are unrated by Fitch.

The Rating Outlook is Stable.

SECURITY

The bonds are special obligations of the issuer, payable solely from revenues and other funds pledged under the trust agreement. Revenues are derived from the fulfillment of the obligations from each of the transaction's varied counterparties.

KEY RATING DRIVERS

RATING DOWNGRADE: The rating action reflects the credit quality of the gas purchasers, various counterparties and the added protection provided by the transaction's operating cash reserves.

NO RATING ENHANCEMENT: The rating also reflects Fitch's withdrawal on Feb. 24, 2010 of the long-term Issuer Default Rating (IDR) of Assured Guaranty Ltd. and subsidiaries. Fitch does not believe that the Assured surety bonds supporting the obligations of the gas purchasers provide additional rating enhancement to the structure.

MULTIPLE GAS PURCHASERS: Gas is purchased by the three participants, the City of Batesville (4.3%), the Town of Lapel (1.2%), and Citizens Gas (94.5%). The largest purchaser, Citizens Gas, exhibits adequate financial metrics and a competitive cost structure that support the current rating on the bonds.

CASH-FUNDED OPERATING RESERVE: Cash-funded operating reserves of $7.9 million are required to be maintained and may be used to pay debt service in the event of a shortfall by any of the gas purchasers. The reserves are well in excess of the anticipated obligations of Batesville and Lapel.

STRONGLY RATED GAS SUPPLIER: Gas is supplied by JP Morgan Ventures Energy Corporation (JPMVEC), rated 'AA-', Stable Outlook by Fitch, and whose obligations are guaranteed by JP Morgan Chase and Co.

STRONG COMMODITY SWAP PROVIDER: The commodity swap provider, BNP Paribas, exhibits a strong credit profile and is rated 'A+', Stable Outlook.

WHAT COULD TRIGGER A RATING ACTION

CHANGE IN COUNTERPARTY RATINGS: The long-term rating on the bonds will continue to be determined by Fitch's assessment of the transaction structure, the role of the remaining counterparties in the structure, including the gas purchasers, and their credit quality.

CREDIT PROFILE

Given the structured nature of prepaid natural gas transactions and the different components of pledged revenues, ratings generally reflect Fitch's assessment of the relevant counterparties and structural enhancements. The principal counterparties in the IBB Series 2007 A & B transactions include JP Morgan Chase & Co. (JPM; rated 'AA-', Stable Outlook), BNP Paribas (rated 'A+',Stable Outlook) and Transamerica Occidental Life Insurance Company (rated 'AA-', Stable Outlook). Gas purchase obligations reside with three Indiana municipal utilities - the City of Batesville, IN, Citizens Gas & Coke Utility, and the Town of Lapel, Indiana - and are supported by Assured Guaranty. Neither Assured nor any of the gas purchasers are currently rated by Fitch.

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.