New York, November 14, 2012 --

Moody's Rating

Issue: State Transportation Refunding Revenue Bonds (Senior Lien) Series 2012; Rating: Aa1; Sale Amount: $215,510,000; Expected Sale Date: 12-3-2012; Rating Description: Special Tax: Transportation-Related

Opinion

Moody's Investors Service has assigned a Aa1 rating to the State of New Mexico's State Transportation Refunding Revenue Bonds (Senior Lien) Series 2012, to be issued through the New Mexico Finance Authority in an estimated amount of $215.5 million. Proceeds of the bonds will refund outstanding debt, including senior lien bonds and prior lien (closed lien) bonds, for debt service savings. Following this refunding, the state will have approximately $970 million parity senior lien transportation revenue bonds, including the current offering, and $640 million subordinate lien transportation revenue bonds outstanding. The state will no longer have any prior lien (closed lien) bonds outstanding. The subordinate lien bonds are rated Aa2 , and the outlook on both liens is stable.

SUMMARY RATING RATIONALE

Following the refunding of the remaining prior lien bonds, the senior lien bonds are secured by a first lien on both state road and highway revenues, consisting primarily of gasoline and diesel fuel taxes, and federal highway aid received by the state. The Aa1 rating on the senior lien bonds reflects ample coverage of debt service by pledged revenues and a strong additional bonds test, balanced against stagnant state revenue, reauthorization risk for federal revenues, and significant variable rate and swap exposure at the subordinate level. In July, the NMFA announced that it was withdrawing its previously released audit for fiscal 2011. We do not believe that the lack of a 2011 audit or related questions about NMFA's internal controls and financial management affect the credit quality of the transportation revenue bonds.

STRENGTHS

* Ample coverage of peak debt service by total pledged revenues and by state revenues alone

* Relatively rapid payout of the transportation revenue bonds, combined with no additional new money borrowing plans

* Strong additional bonds test

CHALLENGES

* Stagnant state highway revenues resulting from the economic downturn and improving fuel efficiency

* Reauthorization and budget risk for the federal revenues

* Significant variable rate and swap exposure, all at the subordinate level

OUTLOOK

The outlook for New Mexico's transportation revenue bonds stable, reflecting ample levels of coverage, and the absence of additional new money borrowing plans.

WHAT COULD MAKE THE RATING GO UP

* Structural changes that result in a significant and permanent improvement in coverage

WHAT COULD MAKE THE RATING GO DOWN

* Significant decline in pledged revenues as a result of economic weakness, or state or federal legislative changes

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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