NEW YORK--(BUSINESS WIRE)--Fitch Ratings assigns a rating of 'AA+' to bank bonds corresponding to the following series of Commonwealth of Massachusetts general obligation (GO) bonds:
--$243.5 million (outstanding) GO refunding bonds (variable rate demand bonds) 2001 series C.
The rating is being assigned in conjunction with the substitution of the liquidity support provided by State Street Bank and Trust Company in the form of a Standby Bond Purchase Agreement (SBPA), with a revised substitute SBPA also to be issued by State Street Bank. Based on a review of the terms governing the bank bonds, it is Fitch's opinion that the incremental risk associated with bank bonds does not have a material impact on the long-term credit rating of the bonds.
The Rating Outlook is Stable.
SECURITY
General obligation of the commonwealth, to which its full faith and credit are pledged.
KEY RATING DRIVERS
STRONG AND WEALTHY ECONOMY: Massachusetts has a broad and diverse economy with the second-highest personal income per capita in the nation.
PRUDENT FINANCIAL MANAGEMENT: The commonwealth has benefited from conservative budgeting and sound financial practices over time. A limitation on the use of capital gains-related tax revenue has reduced the volatility of economically sensitive revenues in the budget, and the commonwealth has shown a commitment to reserve funding.
COMPARATIVELY HIGH LIABILITY BURDEN: Massachusetts' debt levels are high for a U.S. state government, and Fitch expects them to remain so. This is partially explained by the above-average role played by the commonwealth in relation to local levels of government when compared to most other states. In addition, the commonwealth is responsible for the pension benefits of not only commonwealth employees but also teachers statewide, contributing to a combined burden of debt and pensions that is also well above the median for U.S. states rated by Fitch.
RATING SENSITIVITIES
The rating is sensitive to shifts in fundamental credit characteristics including the state's commitment to strong financial management practices.
CREDIT PROFILE
Massachusetts' 'AA+' GO rating reflects considerable economic resources and a record of prudent financial management. Credit strengths are tempered by a comparatively heavy debt burden that Fitch expects to remain high. The Stable Outlook reflects the expectation that the Commonwealth will continue to act as needed to ensure budget balance and maintain an adequate budgeted reserve position.
For more information on the Commonwealth of Massachusetts, see Fitch's rating action commentary 'Fitch Rates $250MM Commonwealth of Massachusetts GO MassDirect Notes 'AA+' dated March 13, 2014 and available at 'www.fitchratings.com'.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Tax-Supported Rating Criteria' (Aug. 14, 2012);
--'U.S. State 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. State Government Tax-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686033
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=827024
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