New York, November 30, 2012 -- Moody's Investors Service has maintained the YMCA of Greater Houston's (TX) Baa3 underlying rating on review for possible downgrade. The YMCA has $196.4 million of rated variable rate debt outstanding issued through the Harris County Cultural Education Facilities Finance Corporation. The Series 2008A-E bonds, the YMCA's only rated debt outstanding, is supported by five letters of credit with three banks.

SUMMARY RATING RATIONALE

The decision to maintain the YMCA's Baa3 rating on review for possible downgrade is based on our expectation that the YMCA will complete transaction documents for a major debt restructuring within a week, as well as our continuing assessment of its ability to continue growing cash flow in coming years to meet projected debt service requirements. The preliminary restructuring plan would lower the YMCA's debt outstanding and reduce some of the risks associated with it's currently 100% variable rate demand bonds debt structure. In addition, preliminary FY 2012 results (ended August 31) indicate positive operating margins for the first time since FY 2007, reflecting the completion of all building projects financed with the 2008 bonds and membership revenue growth.

In addition to a full review of the impact of the debt restructuring on the YMCA's credit profile, our review will analyze the expected final FY 2012 audit to validate the improved operating performance and focus on our analysis of the YMCA's operating projection relative to cash flow necessary to support the new debt structure. We expect to conclude our review of the YMCA's rating in the next few weeks in conjunction with the assignment of ratings to the upcoming refinancing of the current debt. If there is further delay in implementing the debt refinancing plan or if the FY 2012 audit reflects less than expected revenue growth, there could be downward pressure on the rating.

CHALLENGES:

*Risks associated with existing debt structure, including renewal risk and liquidity risk given relatively thin cash and investments, limited headroom under covenants contained in the Letter of Credit Reimbursement Agreements, and ability for debt to be accelerated under certain conditions. In FY 2011, unrestricted cash and investments that could be liquidated within a month covered $200 million of variable rate demand bonds by a low 39.6%.

*Highly leveraged balance sheet and operating position, with debt to operating revenues at 1.91 times in FY 2011 and expendable financial resources to debt at 0.32 times in FY 2011. Limited prospects for balance sheet growth since all investments are in fixed income and the YMCA has generated operating deficits through FY 2011.

*Trend of weak operating performance, as calculated by Moody's, compounded by significantly lower than projected revenue growth related to the opening of new centers in FY 2011. The annual operating margin declined to negative 4.0% in FY 2011 from negative 0.3% in FY 2010, and cash flow margin was 6.6%. However, after the completion of all major capital projects, operations in FY 2012 based on unaudited results reflect positive operations and healthier cash flow.

*Thin liquidity with reported monthly liquidity in FY 2011 at $79.2 million, which covered demand debt by a low 0.4 times. The expected use of approximately $27 million of cash and investments in FY 2013 to pay down existing debt as part of the proposed debt restructuring plan (the "Plan") will further weaken liquidity. While the Plan calls for a material reduction of demand debt, pro forma monthly liquidity to demand debt remains weak at approximately 0.6 times.

STRENGTHS:

*Solid position with broad reach in the demographically strong Greater Houston metropolitan area as a provider of community and recreational services and diverse programming and revenues which helps insulate the organization from variability in any single revenue source. The YMCA has 36 centers, one camp, 212 licensed childcare sites, and 27 apartment outreach centers located throughout the metropolitan area, adding to the underlying revenue diversity and representing geographical diversity within the area.

*Completion of all major capital projects for which debt outstanding was issued. All buildings were substantially completed and operational in FY 2012. Unaudited FY 2012 results reflect a 5.2% increase in revenues, as calculated by Moody's, driven largely by membership growth.

*Expectation of debt restructuring by February 2013, which would result in improved liquidity relative to demand debt, and reflect new covenants that would significantly reduce potential demand on liquidity.

*Mandatory amortization of principal for the 2008 bonds, with sinking payments made each year directly to the trustee.

*Trend of positive cash flow; FY 2011 cash flow was 9.5% and unaudited FY 2012 cash flow indicate an improved 13.8% which would cover FY 2012 debt service by 2.39 times.

PRINCIPAL METHODOLOGY USED

The rating on the YMCA of Greater Houston's debt was assigned by evaluating factors believed to be relevant to the credit profile of the YMCA of Greater Houston such as i) the business risk and competitive position of the issuer versus others within its industry or sector, 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 issuer's history of achieving consistent operating performance and meeting budget or financial plan goals, v) the nature of the dedicated revenue stream pledged to the bonds, vi) the debt service coverage provided by such revenue stream, vii) the legal structure that documents the revenue stream and the source of payment, and viii) the issuer's management and governance structure related to payment.

REGULATORY DISCLOSURES

The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

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Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

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Jenny L. Maloney Vice President - Senior Analyst Public Finance Group Moody'sInvestors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653Karen Kedem 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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