Fitch Affirms NH Bond Bank 1978 Resolution Bonds at 'AA-'; Outlook Stable

NEW YORK--()--Fitch Ratings has affirmed the rating on the following bonds of the NH Municipal Bond Bank at 'AA-':

--$357.905 million outstanding 1978 Resolution Bond Program bonds (issued prior to July 2011).

The Rating Outlook is Stable.

SECURITY

Bonds issued under the 1978 resolution are general obligations of the bond bank, payable from loan repayments of participating local governments. The loans are general obligation (GO) unlimited tax (ULT) bonds of the participating local governments. A moral obligation (MO) pledge of the state of New Hampshire to restore draws on the debt service reserve fund provides additional security and is the basis for the rating.

KEY RATING DRIVERS

RATING BASED ON STATE MORAL OBLIGATION: The rating reflects the security provided by the state's MO to replenish the debt service reserve fund. Under the MO criteria, the rating is limited to two notches below that of the state GO, rated 'AA+' by Fitch.

RATING LINKED TO STATE: The rating is two notches below that of the state GO. The direct linkage reflects that the bond bank is an entity of the state, services a broad state purpose of providing lower cost financing for local governments through the state, and finances basic infrastructure. The provision to intercept state aid indicates the further commitment of the MO provider, the state of NH, to the bond bank.

SOUND MO MECHANISM AND TIMING: The MO mechanism and timing meet Fitch's criteria with all requirements related to the MO spelled out in the authorizing legislation for the Bond Bank. The timing of the mechanism is satisfactory and the processes of notification and appropriation request are specifically spelled out and mandatory for the various parties.

RATING SENSITIVITIES

The rating is sensitive to changes in the state's GO rating, to which it is linked.

CREDIT PROFILE

The rating reflects the application of Fitch's MO criteria. The presence of a sound MO from the state of New Hampshire provides significant credit strength.

According to Fitch's criteria, 'Rating Guidelines for Moral Obligations', dated April 18, 2013, a rating may be linked to that of the MO provider, notching down from its rating rather than up from the primary security's rating, in certain limited circumstances. The 1978 resolution bonds display characteristics that permit such linking to the MO provider. The bond bank is an independent political subdivision of the state whose board includes the State Treasurer and both gubernatorial and council appointees. It serves a broad state purpose of providing lower cost financing to all municipalities in the state - most local issuers utilize the bond bank rather than issuing bonds independently. The projects financed are for basic infrastructure of the participating local governments. There is provision to intercept state aid, indicating the further commitment of the MO provider, the state of NH, to the program.

The MO mechanism, which is spelled out in the authorizing legislation for the bond bank and is triggered by a draw upon the debt service reserve fund, requires the Chair of the bond bank to submit a request to the Chair of the House Appropriations Committee, within 10 days after a draw on the bond reserve fund, for an appropriation to restore it to the required level. The debt service reserve is fully cash funded, the timing of the mechanism is satisfactory and the processes of notification and appropriation request are specifically spelled out and mandatory for the various parties. Bond counsel opined at issuance that all provisions are constitutional and any funds appropriated pursuant to the MO would be appropriated for proper public purposes and are valid.

State support of the bond bank includes a provision to intercept state aid to participating municipalities in the event of a payment default to the bond bank. If any governmental unit fails to make a scheduled payment of principal or interest to the bond bank, the Chair must notify the State Treasurer who is required to intercept any funds due to that governmental unit for the remainder of the fiscal year, to the extent such funds are appropriated from the general fund or education trust fund of the state. If interceptable funds are insufficient, the obligation to intercept is carried over into the succeeding fiscal year. Neither the intercept nor the moral obligation has ever been utilized, because no borrower has defaulted on a loan repayment since the bond bank began operations in 1977.

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

Applicable Criteria Related Research:

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

--'U.S. State Government Tax-Supported Rating Criteria', dated 14 Aug. 2012;

--'Rating Guidelines for Moral Obligations', dated 18 April 2013.

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

Rating Guidelines for Moral Obligations

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=704882

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=849694

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE '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. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Contacts

Fitch Ratings
Primary Analyst
Karen Krop
Senior Director
+1-212-908-0661
33 Whitehall Street
New York, NY 10004
Karen.Krop@Fitchratings.com
or
Secondary Analyst
Eric Kim
Director
+1-212-908-0241
or
Committee Chairperson
Laura Porter
Managing Director
+1-212-908-0575
or
Media Relations
Elizabeth Fogerty, +1-212-908-0526
elizabeth.fogerty@fitchratings.com

Sharing

Contacts

Fitch Ratings
Primary Analyst
Karen Krop
Senior Director
+1-212-908-0661
33 Whitehall Street
New York, NY 10004
Karen.Krop@Fitchratings.com
or
Secondary Analyst
Eric Kim
Director
+1-212-908-0241
or
Committee Chairperson
Laura Porter
Managing Director
+1-212-908-0575
or
Media Relations
Elizabeth Fogerty, +1-212-908-0526
elizabeth.fogerty@fitchratings.com