The high level of risk in the Knox County liquidity profile

The CreditWatch action primarily reflects the high level of risk in the 
county's liquidity profile posed by its series 2016 bond anticipation 
refunding notes (BANs) which we believe contain permissive events of default 
and an acceleration provision. Currently, the outstanding contingent liability 
is $5.5 million, which is equivalent to 103% of the county's general fund 
revenue and 171% of its total cash on hand at the close of fiscal 2016. County 
management has indicated that it plans to either amend the terms of the BAN or 
refinance the obligation to mitigate the potential acceleration. The lender, 
JPMorgan Chase Bank N.A., has certified that the county is not currently in 
default of any of the terms, provisions, representation, or covenants made 
with regard to the series 2016 BANs, which gives us comfort that the payment 
will not be accelerated in the very near term. We expect to resolve this 
CreditWatch placement within the next 90 days. 

Knox County, encompassing approximately 388 square miles in southeastern 
Kentucky, has an estimated population of 31,764. Barbourville is the county 
seat and main employment center.