New York, December 04, 2012 --

Moody's Rating

Issue: School Financing Bonds (1997 Resolution) Series 2012D; Rating: Aa1; Sale Amount: $67,160,000; Expected Sale Date: 12/11/2012; Rating Description: Lease Rental: Appropriation

Opinion

Moody's Investors Service has assigned a Aa1 rating to the Commonwealth of Virginia's$67 million School Financing Bonds (1997 Resolution), Series 2012D, issued through the Virginia Public School Authority (VPSA). Proceeds of the bonds, scheduled to price on December 11, will be used to finance certain public school capital projects.

SUMMARY RATING RATIONALE

The rating on the school financing bonds reflects the VPSA's long established program, including the Commonwealth of Virginia's strong state aid intercept mechanism, but is ultimately based on a sum sufficient appropriation made by the General Assembly that provides direct access to the commonwealth's Literary and General Funds. The rating is based on Virginia's long history of conservative fiscal practices, an economy that has slowed significantly but still fares better than the nation and a strongly-managed debt structure. The commonwealth is currently enjoying strong revenue growth, a structurally balanced budget for fiscal 2013 and is starting to rebuild reserves. Going forward, strong fiscal management and conservative revenue forecasting will continue to benefit the state, and as tax collections improve, the rainy day fund will increase significantly. The outlook is negative due to its indirect linkages to the weakened credit profile of the U.S. government.

STRENGTHS

- The commonwealth's longstanding history of conservative fiscal management

- A diverse local economy that has slowed significantly but still fares better than the nation

- The commonwealth's low but growing debt burden that is controlled through a debt affordability model

CHALLENGES

- Managing the ongoing effects of the sluggish economic recovery on the state's finances, particularly with reduced reserve levels

- Controlling spending pressures from education and transportation needs within the context of more limited resources

- Risk of non-appropriation

- The state economy's direct linkages to the U.S. government

OUTLOOK

Moody's negative outlook on the Commonwealth of Virginia's Aaa rating, and therefore this moral obligation-backed credit, is due to its indirect linkages to the weakened credit profile of the U.S. government. The negative outlook relates to Moody's August 2, 2011 decision to confirm the Aaa government bond rating of the United States and assign a negative outlook, and to our December 7, 2011 assessment of the commonwealth's exposure to indirect linkages to the federal government. Moody's has determined that issuers with indirect linkages, such as Virginia, have some combination of economies that are highly dependent on federal employment and spending, a significant healthcare presence in their economies, have direct healthcare operations, or high levels of short-term and puttable debt. Please see the special comment from December 7, 2011 entitled "Most Aaa-Rated State and Local Governments Revert to Stable Outlooks, Despite Negative Pressure on U.S. Government Rating" for more information.

WHAT COULD MAKE THE RATING GO DOWN

- Deterioration in the commonwealth's financial position

- Drawing down of the commonwealth's reserves to inadequate levels

- Failure to adhere to the commonwealth's tradition of conservative fiscal management

- Non-appropriation of needed funds

- Downgrade of the U.S. government

RATING METHODOLOGY

The principal methodology used in this rating was The Fundamentals of Credit Analysis for Lease-Backed Municipal Obligations published in December 2011. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain 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 certain 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 certain 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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Lisa Heller 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: 212-553-1653 Nicholas E Samuels VP - Senior Credit Officer 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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