New York, June 13, 2012 -- Moody's Rating

Issue: Colorado Unemployment Fund Special Revenue Bonds, Series 2012A; Rating: Aa2; Sale Amount: $83,000,000; Expected Sale Date: 06/18/2012; Rating Description: Special Tax: Non-Sales/Non-Transportation

Issue: Colorado Unemployment Fund Special Revenue Bonds (Taxable), Series 2012B; Rating: Aa2; Sale Amount: $527,000,000; Expected Sale Date: 06/18/2012; Rating Description: Special Tax: Non-Sales/Non-Transportation

Opinion

Moody's Investors Service has assigned a Aa2 rating to the Colorado Unemployment Compensation Fund Special Revenue Bonds, Tax-Exempt Series 2012A and Taxable Series 2012B. The bonds, the first issue of this security, will be issued through the Colorado Housing and Finance Authority in an expected amount of approximately $625 million. Proceeds of the bonds will be used to repay an outstanding advance from the federal government to the state's Unemployment Compensation Fund (UCF), and recapitalize the fund, largely eliminating the need for future advances. The outlook is stable.

SUMMARY RATING RATIONALE

Principal and interest payments on the bonds are, in effect, separately secured. Principal payments are to be made May 15 of each year from available balances in the UCF, which, in turn, is funded with standard unemployment insurance premiums, principal assessments, and (if needed) solvency surcharges, all paid by private employers in the state. Interest payments are secured by a pledge of and lien on interest assessments, paid separately by private employers and transferred to the trustee upon receipt by the state. The rating reflects a large and diverse tax base for the premiums, assessments and surcharges; ample coverage levels even under extremely severe stress scenarios; and generally strong security provisions. At the same time, the rating also reflects that principal payments do not benefit from a pledge of or lien on premiums or assessments, and have no legal priority over benefit payments made from the UCF. Also noted is the absence of a debt service reserve.

STRENGTHS

* Bonds have a short amortization schedule; 5-year final maturity.

* Tax base consists of large and diverse mix of employers, although the employers paying the interest assessment represent only a subset of the employers paying the standard premium and principal assessment.

*Enforcement mechanisms and collection history for premiums and assessments are extremely strong.

* Self-correcting mechanisms increase standard premiums and activate solvency surcharge if the balance in the UCF declines.

* Principal payment date of May 15 immediately follows peak annual inflow of revenues to the UCF; projected April 1-May 15 revenues less benefit payments provide ample coverage even under severe stress scenarios.

* State has pledged not to use any moneys from the UCF to repay any federal advances from April 1-May 15 as long as bonds are outstanding.

* Interest assessments will be set to provide 1.5 times coverage of annual interest payments.

CHALLENGES

* Principal payments are not secured by a pledge of or lien on principal assessments and have no legal priority over unemployment benefit payments made from the UCF.

* The bonds have no reserve fund, although principal payments will benefit from expected balances in the UCF.

OUTLOOK

The outlook on the Colorado Unemployment Compensation Fund Special Revenue Bonds is stable, reflecting the expectation of ample coverage over the life of the bonds even under severe stress scenarios.

WHAT COULD MOVE THE RATING--UP

* Structural changes that strengthen the security, such as the addition of a lien on revenues to secure the principal payments and/or the establishment of a reserve.

WHAT COULD MOVE THE RATING--DOWN

* Unanticipated deterioration in coverage levels as a result of a severe economic downturn or a weakening of collection mechanisms.

* Changes in the federal unemployment program that weaken or alter the timing of cash flows in the state UCF.

The principal methodology used in this rating was US Public Finance Special Tax Methodology published in March 2012. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

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Kenneth Kurtz Managing Director Public Finance Group Moody's FIS Domestic Sales Office - San Francisco CA One Sansome St. Suite 3100 San Francisco, CA 94104 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Kimberly R Lyons 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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