Dallas/Fort Worth International Airport U.S. Bond Market Squeezed by Credit Crisis

PRESENTATION TITLE OR NAME OF GROUP, DATE Replace with partnering logo or delete. Align with bottom of DFW logo. 2 What has caused the Credit Crisis?  Poor lending standards and underwriting practices of banks  Increased use of leverage in financial instruments in recent years  Consumers willing to take on more debt due to favorable economic conditions over the past five years  Lower credit requirements by banks to attract new business  Extending credit to consumers who normally did not qualify for loans (sub-prime borrower)  Adjustable rate mortgage financing structure has caused foreclosures  More than 100 sub-prime mortgage lenders have failed or filed for bankruptcy i.e. New Century Financial Corporation

PRESENTATION TITLE OR NAME OF GROUP, DATE Replace with partnering logo or delete. Align with bottom of DFW logo. 3 How the U.S. Credit Crunch Went Global  The huge bundling of sub-prime mortgages packaged and sold to financial companies across the world  Bad loads are having a major impact on foreign banks and markets  French bank BNP Paribus froze three of its funds worth approximately $2.75 billion  NIBC, midsize Dutch Bank, reported an estimated $189 million loss  European banks have begun to hoard their cash and have increased the interest rates they charge to lend each other causing liquidity concerns  European Central Bank loaned the eurozone region’s banks a record $130 billion to stimulate liquidity  Similar concerns prompted other world central banks to make the same move, such as Japan, Australia, Canadian and US Source: TIME In Partnership with CNN, 8/10/07.

PRESENTATION TITLE OR NAME OF GROUP, DATE Replace with partnering logo or delete. Align with bottom of DFW logo. 4 What are the results of the credit crisis?  The major result of the credit crisis has been the lack of liquidity available in the money markets  Banks are reluctant to lend to one another or extend credit lines to traditional customers  Brokers dealers  Money managers  Hedge fund managers  Others  The reluctant is due to uncertainty about how much credit exposure they may have with problem loans  Banks are hoarding money to cover losses they incur in the coming months

PRESENTATION TITLE OR NAME OF GROUP, DATE Replace with partnering logo or delete. Align with bottom of DFW logo. 5 How does the credit crisis affect the tax-exempt issuer?  Stringent credit standards and reluctance of banks to lend have caused the cost of borrowing to increase  The liquidity shortage may make it more costly for investors to finance their bond purchases  LIBOR (London Interbank Offered Rate) is the rate at which banks in Europe loan to each other for 1 week to 12 months  LIBOR is used to determine the price of variable rate government and corporate loans  Municipal issuers may have to offer higher yields to attract investors Source: Bloomberg.

PRESENTATION TITLE OR NAME OF GROUP, DATE Replace with partnering logo or delete. Align with bottom of DFW logo. 6 How does the credit crisis affect the tax-exempt issuer?  Stronger investor demand has driven long rates lower while yields on auction rate securities (ARS) continue to trend higher for credit/liquidity reasons Source: Bloomberg.

PRESENTATION TITLE OR NAME OF GROUP, DATE Replace with partnering logo or delete. Align with bottom of DFW logo. 7 Municipal Bond Deals Squeezed by Credit Crisis  The widening credit crunch is making it harder for U.S. municipalities to fund vital projects from the $2.5 trillion market for municipal bonds  The credit crunch has forced issuers to choose between delaying the project or pay higher interest rates  Paying higher interest rates ultimately effects the tax payer and its affects rates, fees and charges that airports pay  Lower rated entities must pay more in borrowing costs  Many municipalities faced with paying higher interest rates have delayed their financing  Chicago – $960 million  Miami International Airport - $540 million  District of Columbia - $350 million Source: Washington Post, November 29, 2007

PRESENTATION TITLE OR NAME OF GROUP, DATE Replace with partnering logo or delete. Align with bottom of DFW logo. 8 Municipal Bond Insurance Crisis  The municipal bond market has been squeezed by steep sub-prime related losses among the bond insurers  Entities with poor credit ratings often rely on insurers to back their bonds enabling them to pay lower interest rates  Insurers are now facing massive write-downs due to their exposure to the mortgage industry  Some bond insurers are running out of money and a few are endanger of being downgraded by the rating agencies  Ambac’s “AAA” rating was recently downgraded to “AA” by Fitch  XL Capital Assurance was downgraded 1/24/08 from “AAA” to “A” by Fitch

PRESENTATION TITLE OR NAME OF GROUP, DATE Replace with partnering logo or delete. Align with bottom of DFW logo. 9 U.S. Airports with Variable Rate Exposure Source: Bloomberg, Official Statements, City Audits.