Fitch Affirms Nassau County NY's GOs at 'A+' & BANS at 'F1'; Outlook Negative

NEW YORK--()--Fitch Ratings takes the following rating action on Nassau County, New York (the county):

--$163.3 million general improvement bonds, 2013 series A affirmed at 'A+';

--187.8 million bond anticipation notes (BANs), 2013 series A affirmed at 'F1'.

The Rating Outlook is Negative.

The bonds (via competition) and notes (via negotiation) are scheduled to price on Feb. 21. Fitch's affirmation today follows the original rating assignment on Feb. 11, 2013 and a subsequent adverse court opinion issued on Feb. 14, 2013.

ADVERSE COURT OPINION ISSUED ON WAGE-FREEZE LAWSUIT

The U.S. District Court for the Eastern District of New York issued, on Feb. 14, 2013, an opinion granting the plaintiffs' (law enforcement unions) summary judgment seeking to nullify the Nassau County Interim Finance Authority's (NIFA) imposition of a wage freeze in 2011. The judge stayed his decision pending appeal. NIFA announced that it will appeal to the United States Court of Appeals for the Second Circuit.

Fitch expects that NIFA will continue as planned and extend the wage freeze set to expire in late March. The county believes that fiscal 2013 cash flow should not be affected, which Fitch views as reasonable given the likelihood that the appeal process could extend into next year. However, the projected budget gap of $61.9 million for 2014 would substantially increase if NIFA loses its appeal and is required to repay approximately $80 million of wage savings achieved through 2012 as well as budget savings that continues to accrue.

An adverse decision on appeal would further stress the county's already limited financial flexibility and would likely result in a downgrade. While the county would likely issue judgment bonds to cover retroactive pay, Fitch believes the county's options for meaningful revenue and expenditure adjustments to manage a larger resultant pro forma budget gap, are limited; reflected in the Negative Outlook.

For more information on bond and notes security as well as key rating drivers and rating sensitivity, see Fitch's Feb. 11, 2013 rating action commentary titled 'Fitch Rates Nassau County, NY's GOs 'A+' & BANs 'F1'; Outlook Negative' available at www.fitchratings.com.

At this time, Fitch also affirms the following ratings:

--$1.4 billion in outstanding general obligation (GO) bonds at 'A+';

--$259 million in outstanding Nassau Health Care Corporation (NCHCC) county guaranteed bonds at 'A+';

--$13.1 million in outstanding Nassau Regional Off-Track Betting Corporation (NROTBC) revenue bonds series 2005 at 'A';

--$480 million in outstanding notes at 'F1'.

The Rating Outlook for all long-term debt is Negative.

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Tax-Supported Rating Criteria' (Aug. 14, 2012);

--'U.S. Local Government Tax-Supported Rating Criteria' (Aug. 14, 2012).

Applicable Criteria and Related Research:

Tax-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686015

U.S. Local Government Tax-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=685314

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Contacts

Fitch Ratings
Primary Analyst
Karen Wagner, 1-212-908-0230
Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Amy Laskey, 1-212-908-0568
Managing Director
or
Committee Chairperson
Jessalynn Moro, 1-212-908-0608
Managing Director
or
Media Relations
Elizabeth Fogerty, New York, +1-212-908-0526
elizabeth.fogerty@fitchratings.com

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Contacts

Fitch Ratings
Primary Analyst
Karen Wagner, 1-212-908-0230
Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Amy Laskey, 1-212-908-0568
Managing Director
or
Committee Chairperson
Jessalynn Moro, 1-212-908-0608
Managing Director
or
Media Relations
Elizabeth Fogerty, New York, +1-212-908-0526
elizabeth.fogerty@fitchratings.com