Fitch U.S. Muni Surveillance: Wisconsin's Petroleum Fee Bonds Affirmed at 'AA-/F1+'

NEW YORK--(BUSINESS WIRE)--In the course of routine surveillance, Fitch Ratings has affirmed the following outstanding ratings for the State of Wisconsin (the state):

--$130 million petroleum inspection fee revenue bonds at 'AA-';

--$142 million petroleum inspection fee revenue extendible municipal commercial paper (EMCP) at 'F1+'.

The Rating Outlook on the long-term 'AA-' rating is Stable.

The bonds are secured by a petroleum inspection fee paid by suppliers on all petroleum products received for sale in Wisconsin. The per gallon fee, which was reduced from $0.03 to $0.02 effective April 1, 2006, is collected along with other motor fuel taxes by the department of revenue and distributed on a monthly basis to the bond trustee to pay debt service. The reduction in the pledged fee rate was accompanied by early retirement of some outstanding debt and coverage levels remain satisfactory.

Factors mitigating the potential volatility of the pledged revenue stream and the interest rate risk involved with issuing large levels of variable-rate debt include the required monthly completion of a variable-rate capacity test to estimate the amount of variable-rate debt that could be funded by senior petroleum inspection fee revenue bonds while maintaining 2 times debt service coverage.

Underlying the 'F1+' rating on the EMCP is the credit quality of the senior petroleum inspection fee revenue bonds to be issued to ultimately fund the notes and the market access of such bonds demonstrated in previous bond sales. Interest payments on the EMCP notes are paid on parity with the bonds. Principal payments are subordinate. The state has authorized and pledges long-term senior petroleum inspection fee revenue refunding bonds to ultimately take out the notes. The state intends, but is not obligated, to pay principal on the original maturity date from proceeds of rollover notes. The state, however, has the option to extend the maturity to 270 days from the original issuance date in the event of a loss of market liquidity and accordingly there is no liquidity provider.

Fitch issued an exposure draft on July 31, 2008 proposing a recalibration of tax-supported and water/sewer revenue bond ratings which, if adopted, may result in an upward revision of this rating (see Fitch research 'Exposure Draft: Reassessment of the Municipal Ratings Framework'.) At this time, Fitch is deferring its final determination on municipal recalibration. Fitch will continue to monitor market and credit conditions, and plans to revisit the recalibration in the first quarter of 2009.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.