New York, November 29, 2012 -- Moody's Investors Service has assigned a provisional (P)Baa3 rating to Route 460 Funding Corporation of Virginia's (the Funding Corporation) $232 million of Senior Lien Current Interest Bonds and $62M of Senior Lien Capital Appreciation Bonds. The rating outlook for the bonds issued by the Funding Corporation is stable.

Upon review of final documentation, in the event that there are no material changes to the information reviewed to date, we would expect to assign a definitive rating of Baa3 to the Current Interest Bonds and Capital Appreciation Bonds.

The proceeds of the bond issue will be used as part of the funding for the US Route 460 Corridor Improvements Project (Project), a 55 mile, four lane divided toll road facility in Virginia which will connect the cities of Petersburg and Suffolk as well as provide an alternative route from Richmond through to Virginia Beach.

The Funding Corporation is a private, 63-20 non-profit corporation located in Virginia.

RATING RATIONALE

The Project entails both the construction of the toll road, as well as certain operating and maintenance obligations once construction has been completed, over a 40 year concession which has been awarded to US 460 Mobility Partners (US460) by the Virginia Department of Transportation (VDOT).

Moody's views the Project risks differently in the construction and operating phases. In the construction phase, the rating reflects [i] the straight forward construction requirement, [ii] the competence of the design build joint venture (DBJV) participants, [iii] the security package provided by the DBJV as well as [iv] the substantial public funding component.

The main construction elements consist of earthworks and embankment construction, as well as bridge design and utility connections. We note that relative to other rated toll road projects, this project is simpler in that [i] construction is to take place mostly through rural areas and [ii] there is no tunneling component.

The construction works will be undertaken by a DBJV comprising subsidiaries of Ferrovial Agroman S.A and American Infrastructure Inc, with their obligations joint and severally guaranteed by these parent companies. We think that the DBJV participants are capable of completing the construction requirements and that the construction contract could be successfully re-tendered in the event of a builder default.

As part of the construction contract, there will be a considerable performance bond of $500M, or roughly 36% of the construction price, which can be used to support any liquidated damages payable in a cost overrun scenario. Moody's sees this level of credit support higher than levels typically provided in similar transactions, and supports the provisional Baa3 rating.

Finally, in the construction phase Moody's notes that roughly 75% of total funding is sourced from VDOT. We think that this high level of public funding signals a strong level of support for the project and will help align interests between the Funding Corporation and VDOT.

Once construction of the Project has been completed, the Funding Corporation will sub-contract the majority of its operations phase obligations back to VDOT, and will retain operations phase obligations largely limited to items such as purchase and maintenance of the electronic toll collection system for the remainder of the 40 year concession.

During the operations phase, the Funding Corporation will receive revenues from tolls on the Project and will rely on these revenues to pay debt service. In the operations phase, the rating reflects [i] the economic value of the Project to its users, as well as [ii] the value of the Funding Corporation's rate raising ability and [iii] the ability of the Project to repay debt under stress scenarios.

The motivation for the Project is to [i] accommodate increasing freight movements, [ii] remove commercial traffic from the existing Route 460 as well as [iii] improving safety and travel times.

As part of our operations phase analysis, we have considered a third party traffic model which assigns a value of time based off the median hourly income of the service area residents, who are modeled to use the Project when the value of time savings exceed their cost of use. This model also considers population changes over time, as well changes in alternative road capacity as a result of the Project being built.

We note that under this approach there appears to be sufficient economic value to the Project to support a provisional (P)Baa3 financial profile. However, we also note that actual traffic volumes may vary, as the Project is scheduled to commence operations in 2018 and demand may be different from forecasts.

We further note that unique to other toll road concessions which have a fixed or index linked toll rate, the Funding Corporation will retain the power to set rates that are toll maximizing. This is a credit positive factor that helps reduce the risk of revenues being insufficient to cover debt service, and is not standard for toll road concessions.

The Project includes a number of credit supports which increase its ability to perform under cases of lower than expected traffic -- due to presence of a [i] $8M ramp up fund and [ii] $80M revolving line of credit from the Virginia Transportation Infrastructure Bank (VTIB) -- both of which can be drawn upon if there is insufficient cash to pay debt service on the Current Interest Bonds or Capital Appreciating Bonds. After considering these sources, we note that the Project can withstand up to a 37% reduction on expected revenues and still break even, which we think is sufficiently robust to support a provisional (P)Baa3 rating.

Moody's views this transaction as having elements of both U.S. Public Finance Transactions and traditional Project Financings. More specifically, the ability for the Project to raise its rates to cover debt service is more typical of public finance transactions, as are certain security provisions, which include a pledge of revenues from the Project.

The outlook is stable, reflecting our expectation that the DBJV will achieve its construction milestones on the dates it has proposed.

The rating is unlikely to face upward pressure in the short term, as we do not think it is likely that the DBJV will materially outperform its construction timeline at this early stage of the project. Similarly, we see a low likelihood of downward pressure in the short term, absent an unforeseen event in the construction such as a builder default with challenges to re-tendering the construction contract.

The methodologies used in this rating were State and Local Government-Owned Toll Facilities in the United States published in March 2006, and Construction Risk in Privately-Financed Public Infrastructure (PFI/PPP/P3) Projects published in December 2007. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

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Michael O'Connor Senior Vice President Project Finance Group Moody'sInvestors Service, Inc. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653Chee Mee Hu MD - Project Finance Project 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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