NEW YORK--()--Fitch Ratings affirms the 'F1+' rating on $40.8 million of outstanding variable-rate limited obligation bonds, series 2009 of the city of Raleigh, North Carolina (the city).
The bonds are a limited obligation of the city secured by payments made by the city pursuant to a trust agreement subject to annual appropriation. The bonds are also secured by a deed of trust on a parking deck and several operations and public safety facilities.
KEY RATING DRIVERS
FOCUS ON HIGH CREDIT QUALITY: The 'F1+' rating principally reflects the long-term credit quality of the city (Fitch general obligation [GO] rating of 'AAA') and sufficient period of time following a tender and failed remarketing to access the capital markets and provide takeout proceeds.
EXTENDED REMARKETING WINDOW: Bonds in windows mode are not subject to mandatory tender for purchase until 210 days following the tender notice.
AMPLE LIQUIDITY AND REVENUE CAPACITY: Risk to market access is tempered by the city's consistently strong balance sheet resources, sufficiently documented asset liquidation procedures, and healthy revenue raising capacity.
MODE CONVERSION: The rating does not cover the potential conversion to another interest rate mode.
Raleigh is located in Wake County in the north central portion of the state. The city has a population of close to 420,000.
LONG-TERM CREDIT QUALITY, MARKET ACCESS DRIVE 'F1+' RATING
The assignment of the 'F1+' rating reflects Fitch's belief that given the city's 'AAA' credit quality and demonstrated access to debt markets through frequent GO issuance, the city will be able to access capital to fund any tender during the windows period.
In contrast to the short-notice purchase requirement that traditionally accompanies variable-rate demand notes all bonds in windows mode will not be subject to mandatory tender for purchase until 210 days following the tender notice.
While in windows mode upon tender there is a 30-day remarketing window which is followed by a 180-day funding period during which time the city may issue refunding bonds, remarket in the windows mode at a new spread, convert to another mode or another security type including third-party liquidity, or liquidate investments to provide for the purchase price of the bonds.
The bonds do not feature contractual credit or liquidity enhancements from third-party financial institutions. Therefore in the unlikely event the bonds are not remarketed and capital market access is disrupted, bondholder repayment is dependent on the city's balance sheet and operating cash flow. At Dec. 31, 2012, the value of investments immediately available or maturing within one-month and three-month intervals was $101.9 million and $178.3 million, respectively.
USE OF LONG- TO SHORT-TERM MAPPING
Fitch's short-term debt ratings are related to those of long-term obligations. Certain factors may heighten risk to making short-term payments relative to long-term principal and interest; however, the deviation will rarely be more than one notch. The short-term rating of 'F1+' generally corresponds to long-term ratings from 'AA-' to 'AAA'.
For more information on the city's GO rating, please see 'Fitch Rates Raleigh, North Carolina GOs 'AAA'; Outlook Stable' dated April 18, 2012.
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.
In addition to the sources of information identified in Fitch's Tax-Supported Rating Criteria, this action was additionally informed by information from Creditscope, University Financial Associates, S&P/Case-Shiller Home Price Index, IHS Global Insight, and National Association of Realtors.
Applicable Criteria and Related Research:
--'Tax-Supported Rating Criteria' (Aug. 14, 2012);
--'U.S. Local Government Tax-Supported Rating Criteria' (Aug. 14, 2012);
-- 'Rating U.S. Municipal Short-Term Debt' (Nov. 27, 2012).
Applicable Criteria and Related Research
Rating U.S. Municipal Short-Term Debt
Tax-Supported Rating Criteria
U.S. Local Government Tax-Supported Rating Criteria