CHICAGO--(BUSINESS WIRE)--Fitch Ratings affirms its 'AA+' rating on the following outstanding New Hampshire Municipal Bond Bank (NHMBB) program bonds:
--Approximately $1.2 million in outstanding 1979 general resolution bonds.
The Rating Outlook is Stable.
SECURITY
The bonds are primarily secured by loan repayments and a cash funded debt service reserve fund (DSRF). The DSRF is required to be maintained at maximum annual debt service on the loan. Each loan securing the bonds is backed by a full faith and credit pledge of the state. A state-aid intercept and a state moral obligation on the reserve fund provide additional credit enhancement.
KEY RATING DRIVERS
RATING BASED ON STATE GO: The loan security for the state guaranteed program's two remaining participants is strong given the general obligation (GO) full faith and credit pledge of the state (GO debt rated 'AA+'; Stable Outlook by Fitch), which backs borrower loan repayments.
SOLID RESERVE INVESTMENTS: Cash funded debt service reserves, which are invested in U.S. treasury and agency securities provide protection in the event of any missed loan repayments; released reserves help pay debt service as bonds amortize.
ADDITIONAL PROGRAM SECURITY: Bondholders are also afforded protection through a state-aid intercept provision and a moral obligation of the state.
NO ADDITIONAL LEVERAGE EXPECTED: Since 1997, no new money bonds have been issued under the state guaranteed program. NHMBB uses another one of its bond programs to help finance capital needs of governmental entities throughout the state.
RATING SENSITIVITIES
CHANGE IN STATE GO RATING: The rating is sensitive to changes in the state's GO rating, to which it is linked.
CREDIT PROFILE
Established in 1977, NHMBB is an independent political subdivision of the state, which issues bonds and uses the proceeds to make loans for capital projects to local government borrowers throughout the state.
STRONG BOND SECURITY
Fitch's rating is primarily based on the state's GO full faith and credit pledge, which backs each loan under the state guaranteed resolution. Bondholders also benefit from program reserves, which are available to make up shortfalls due to any potential missed loan repayments. The reserve fund, which totals $426,719 or 36% of bonds outstanding, is currently invested in U.S. treasury and agency securities.
The bonds are also supported by a state aid intercept mechanism for any state funds payable to borrowers and a state moral obligation, albeit not a legal requirement, to replenish the DSRF if it falls below its minimum specified level of maximum annual loan debt service. Neither the intercept nor the moral obligation has ever been utilized because no borrower has defaulted on a loan repayment since NHMBB began operations in 1977.
NO ADDITIONAL PROGRAM BONDS ARE EXPECTED
NHMBB's state guaranteed loan portfolio has declined to only two borrowers - North Conway Water Precinct and Stewartstown School District - down from nine in 2012 and 25 borrowers in 2009. The shrinkage of the state guaranteed loan portfolio results from bonds maturing as no new money bonds have been issued under this program since 1997. Both of the remaining borrowers have remained current on their loans. Loan payments are due five days before the bond payment dates. NHMBB could charge borrowers 12% interest if a payment were late.
All state guaranteed bond issues are scheduled to mature in August 2017. Since 1997, NHMBB has issued bonds to fund loans to local government borrowers under its non-state guaranteed 1978 (rated 'AA-'; Stable Outlook by Fitch) and 2005 (not rated by Fitch) resolutions. NHMBB does not expect new money bond issuance under the state guaranteed resolution in the future, although the program will remain open.
For more information on the state please see 'Fitch Rates New Hampshire's $84MM GO Bonds 'AA+', Nov. 22, 2013', available at 'www.fitchratings.com'.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Revenue-Supported Rating Criteria', dated June 16, 2014;
--'State Revolving Fund and Leveraged Municipal Loan Pool Criteria', dated April 28, 2014;
--'Rating Guidelines for Moral Obligations', April 18, 2013.
Applicable Criteria and Related Research:
Revenue-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=750012
State Revolving Fund and Leveraged Municipal Loan Pool Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=746076
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=882514
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