Fitch Rates Alaska HFC SCPBs II 2014 Series C 'AA+'; Outlook Stable

NEW YORK--()--Fitch Ratings assigns an 'AA+' long-term rating to the following Alaska Housing Finance Corporation (AHFC) bonds:

--$140 million State Capital Project bonds II, 2014 series C.

Additionally, Fitch affirms approximately $1.2 billion in bonds backed by AHFC's general obligation pledge (see full list below).

The Rating Outlook for all the bonds is Stable.

SECURITY

The bonds are general obligations of the AHFC for which its full faith and credit is pledged.

KEY RATING DRIVERS

STRONG ISSUER FINANCIAL POSITION: AHFC consistently has one of the highest financial strength profiles relative to its peers which contribute to its 'AA+' general obligation (GO) rating. Despite net operating losses over the last few years, the sizable asset base allows the corporation to maintain its credit strength.

SUCCESSFUL MANAGEMENT PERSONNEL: AHFC has a well-tenured, strong management staff that continues to demonstrate the financial flexibility to address market challenges.

GEOGRAPHIC CONSTRAINTS: A high portion of AHFC's loan portfolio, which provides security for other general obligation backed bonds, lies in or around the city of Anchorage (50%). This amount of geographic concentration makes it difficult to increase the rating past the current level.

STRONG UNDERLYING ASSETS: The aggregate underlying mortgage portfolio of the AHFC has consistently performed adequately and has a current delinquency rate of only 2.2% (60+ days) which is lower than state and national averages.

RATING SENSITIVITY

INCREASED STATE TRANSFERS: Under current legislative policies, transfers from AHFC to the state of Alaska are annually capped at the lesser of $103 million or 75% of change in net assets. Any changes to this policy that could increase AHFC's exposure to potentially higher transfers would put negative pressure on the corporation's GO rating.

CREDIT PROFILE

The 2014 series C bonds are being issued as LIBOR based bonds with no demand feature and a final maturity date of 2029. The bonds are expected to be privately placed on the week of Aug. 25. The bond proceeds will be used to refund outstanding debt obligations of AHFC. No mortgage loans are pledged to the bonds, with the GO of the Corporation being the sole security to the bonds. Therefore, the 'AA+' rating on the bonds reflects the rating on AHFC's GO debt pledge.

AHFC continues to illustrate its strong financial position despite net losses for the last few years. The Corporation has continuously maintained strong leverage and profitability ratios. As of FY 2013, the Corporation had a debt to equity ratio (DTE) of 1.5x and a net interest spread (NIS) of 28.2%. Both ratios are better than the DTE and NIS 10-year medians for all 51 SHFAs which were 5.5x and 23.2%, respectively. The Corporation's financial ratios can be attributed to their strong loan portfolio, sizeable equity base, and successful managerial oversight.

A credit concern going forward is the Corporation's relationship with the state of Alaska and the state's expected transfers from AHFC. However, a statutory change, effective in fiscal 2003, caps AHFC's annual transfers to the state at the lesser amount of $103 million or 75% of a change in net assets. While this policy mitigates current concerns over transfers to the state of Alaska, any changes to this policy that could increase AHFC's exposure to potential higher transfers and would put negative pressure on the corporation's GO rating.

The other credit concern centers around the geographic concentration in AHFC's loan portfolio. Anchorage and its suburb, Wasilla/Palmer, account for approximately 50% of the Corporation's loan portfolio which would allow for a natural disaster in this area to put negative pressure on a majority of the loan portfolio, and subsequently the GO rating. Additionally, Alaska's real estate market is vulnerable to the state's cyclical oil-driven economy.

Additionally, Fitch affirms its 'AA+' ratings on the following AHFC bonds:

--$14.6 million (Univ of Alaska) Governmental Purpose bonds 1997 series A;

--$0.1 million Housing Development bonds, series 2004 A & B;

--$257.9 million General Housing Purpose bonds, 2005 series A, B, & C;

--$48.3 million State Capital Project bonds, 2002 series C;

--$88.6 million State Capital Project bonds, 2006 series A;

--$78 million State Capital Project bonds, 2007 series A & B;

--$79 million State Capital Project bonds, 2011 series A;

--$141.3 million State Capital Project bonds II, 2012 series A & B;

--$136.8 million State Capital Project bonds II, 2013 series A & B;

--$124.4 million State Capital Project bonds II 2014 series A & B;

--$186.5 million General Mortgage Revenue bonds II, 2012 series A & B;

--Housing Mortgage Revenue Bank bonds, series 2009 A.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'State Housing Finance Agencies General Obligation Rating Criteria' (Feb. 27, 2014);

--'Revenue-Supported Rating Criteria' (June 16, 2014).

Applicable Criteria and Related Research:

State Housing Finance Agencies General Obligation Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=736598

Revenue-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=750012

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=847115

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Contacts

Fitch Ratings
Primary Analyst
Ryan J. Pami
Analyst
+1-212-908-0803
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Charles Giordano
Senior Director
+1-212-908-0607
or
Committee Chairperson
Linda Friedman
Senior Director
+1-212-908-0727
or
Media Relations
Elizabeth Fogerty, New York, +1-212-908-0526
elizabeth.fogerty@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Ryan J. Pami
Analyst
+1-212-908-0803
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Charles Giordano
Senior Director
+1-212-908-0607
or
Committee Chairperson
Linda Friedman
Senior Director
+1-212-908-0727
or
Media Relations
Elizabeth Fogerty, New York, +1-212-908-0526
elizabeth.fogerty@fitchratings.com