New York, November 16, 2012 -- Moody's Investors Service has affirmed the Western Pennsylvania School for Blind Children's (WPASBC) Aa2/VMIG 1 ratings on its Series 2001 variable rate demand revenue bonds. The bonds were issued through the Allegheny County Industrial Development Authority. The outlook remains stable. The short-term rating is based on a standby bond purchase agreement with PNC Bank, N.A. (A2/P-1/positive) discussed below.

SUMMARY RATING RATIONALE

The Aa2 rating and stable outlook reflect the school's stable market position as the only state-chartered school for visually impaired children in Western Pennsylvania, a FY 2012 total financial resource base of $196.7 million, robust liquidity, and very strong operating performance. Credit challenges include heavy funding reliance on the recently downgraded Commonwealth of Pennsylvania (Aa2, stable) and modest fundraising. The VMIG 1 rating is based on the structure of the Standby Bond Purchase Agreement (SBPA or liquidity facility), the short term rating the of the bank providing the SBPA and the rating of the school.

STRENGTHS

*WPASBC serves an essential mission of providing special education for visually impaired children with additional disabilities in the Commonwealth of Pennsylvania. Located in the Oakland section of Pittsburgh, the school enrolled 176 students in fall 2012, approximately 19% live on campus. The school also serves students not enrolled at the school by providing on-site instruction and consultation at area school districts.

*Strong liquidity, with $177.1 million of unrestricted monthly liquidity in FY 2012, which could fund operations for approximately 8.7 years, and covers demand debt 118 times. This high level of available resources is a significant credit strength given the school's exposure to variable rate demand debt ($15 million) and high reliance on Commonwealth appropriation (51.4% of revenues) for operations.

*Strong financial resource base relative to modest debt and small operating budget, with expendable financial resources of $190.0 million in FY 2012 cushioning debt 12.7 times and annual operations 8.8 times.

*Stellar operating performance largely supported by reduced dependence on endowment spending for operations. The school generated an average operating margin of 25.2% (FYs 2010-2012) and average debt service coverage of 69.7 times over the same time period (the school's debt service is solely comprised of interest payments), and in FY 2012 generated strong operating cash flow of 36.2%--FY 2012 operating performance is higher than typical years due to receipt of a large $4.9 million bequest.

*No additional debt plans. CHALLENGES *As a Commonwealth chartered private institution, the school is highly reliant on Commonwealth appropriations for operations at 51% of FY 2012 operating revenues. Annual appropriations have increased a modest total of 3% since FY 2009 to $9.8 million in FY 2009. Management expects a minimal increase for the 2013 fiscal year.

*Modest fundraising, with approximately $2.4 million of average gift revenue, and no plans for a comprehensive fundraising campaign.

*Considerable proportion (59%) of the school's employees are covered under collective bargaining agreements that expire in 2013 and 2014, providing the school with limited expense flexibility.

*Decline in residential students may pressure operating revenue, as school districts become less willing to send residential students to WPASBC.

*100% of debt is in the variable rate demand mode, although this challenge is mitigated by WPASBC's robust liquidity.

Outlook

The stable outlook reflects Moody's expectation that the school will continue to serve an essential mission within Pennsylvania, receive at least stable appropriations from the Commonwealth, and maintain an ample financial resource and liquidity cushion to support debt and operations.

WHAT COULD MAKE THE RATING GO UP

Growth in financial resource base supporting debt and operations; significant increase in philanthropic and Commonwealth support

WHAT COULD MAKE THE RATING GO DOWN

Weakening of the Commonwealth resulting in declining appropriation or adverse rating change; deterioration of financial resource base supporting debt and operations

METHODOLOGY

The rating on the Series 2001 bonds was assigned by evaluating factors believed to be relevant to the credit profile of Western Pennsylvania School for Blind Children such as i) the nature of the dedicated revenue stream pledged to the bonds, ii) the capital structure and financial risk of the issuer, iii) the projected performance of the issuer over the near to intermediate term, iv) the business risk and competitive position of the issuer versus others within its industry or sector, v) the budgeting flexibility of the issuer, vi) the issuer's management and governance structure. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Credit Policy & Methodologies directory.

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Caitlin Bertha Associate Analyst Public Finance Group Moody'sInvestors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653Dennis M. Gephardt Vice President - Senior Analyst Public Finance Group JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Releasing Office: Moody's Investors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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