NEW YORK--(BUSINESS WIRE)--Fitch Ratings affirms the 'F1+' short-term rating on outstanding Texas Public Finance Authority (TPFA) general obligation (GO) commercial paper (CP) notes and CP revenue notes, including:
--GO CP notes, series 2008 (tax-exempt);
--GO CP notes (Cancer Prevention and Research Institution of Texas Project), series 2010A (taxable) and series 2010B (tax-exempt);
--Tax-exempt CP revenue notes, series 2003.
SECURITY
The GO CP notes are general obligations to which the state pledges its full faith and credit. The CP revenue notes are special obligations of TPFA payable from lease payments of the state, subject to biennial appropriation. Additionally, under individual series standby liquidity agreements, the state comptroller commits to purchase unsold notes from state cash resources.
KEY RATING DRIVERS
AMPLE LIQUIDITY FOR MATURING CP NOTES: State of Texas treasury fund assets managed by the Comptroller are sizable and more than sufficient to support the liquidity needs of maturing CP notes and other short-term securities that are not remarketed. The treasury fund is invested conservatively, with approximately one-quarter of its portfolio invested in cash, money market or U.S. treasury securities. Coverage of maximum potential liquidity needs of CP notes and other issues whose liquidity is supported by the state is ample.
STATE GO BONDS RATED 'AAA': The state's long-term credit quality is reflected in its 'AAA' GO bond rating, which is based on its low debt burden, conservative financial operations and a growth-oriented economy that continues to outpace national averages.
RATING SENSITIVITIES
ADEQUACY OF CASH RESOURCES: The rating is sensitive to the continued adequacy of cash resources managed by the comptroller and available to support the notes' liquidity needs.
CREDIT SUMMARY
The 'F1+' short-term rating is based on the liquidity support provided by the state of Texas to certain CP programs and variable-rate bonds of various state agencies. Under separate series liquidity agreements between the issuing agency and the Texas Comptroller of Public Accounts, cash resources of the state treasury fund are made available to purchase maturing notes that are not successfully remarketed.
As of Sept. 30, 2014, the state had total liquidity commitments of $971.1 million, with a maximum daily commitment of $568.3 million; commitments include 365 days of interest at the maximum rate. A total of $313.7 million was outstanding under all of the programs.
The market value of the treasury portfolio was $31.9 billion as of Sept. 30, 2014. Portfolio assets are invested conservatively, with $3.7 billion in cash and money market funds and another $4.7 billion in U.S. treasury securities. The weighted average maturity of the treasury portfolio was 1.29 years.
Coverage of liquidity commitments by treasury fund assets remains ample. As of Sept. 30, 2014, treasury fund assets would cover the maximum liquidity commitment under existing programs by 32.9x, and the maximum daily commitment would be covered 56x. Coverage remains ample even after applying varying discounts to assets classes with less liquidity, as per Fitch's criteria.
Texas' long-term 'AAA' GO rating reflects its low debt burden, conservative financial operations and a growth-oriented economy that continues to outpace national averages. Financial pressures arise from the demand that rapid growth places on the state's consumption-based tax system, including for longer term transportation needs and the state's commitment to education.
For additional information on the GO rating of the state of Texas, please see Fitch's rating action commentary, 'Fitch Affirms Texas GO Rating at 'AAA'; Outlook Stable', dated Aug. 8, 2014, available at www.fitchratings.com.
Additional information is available at 'www.fitchratings.com'.
In addition to the sources of information identified in the Tax-Supported Rating Criteria, this action was additionally informed by information from IHS Global Insight.
Applicable Criteria and Related Research:
--'Tax-Supported Rating Criteria' (Aug. 14, 2012);
--'U.S. State Government Tax-Supported Rating Criteria' (Aug. 14, 2012);
--'Criteria for Assigning Short-Term Ratings Based on Internal Liquidity' (Dec. 9, 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
Criteria for Assigning Short-Term Ratings Based on Internal Liquidity -- Effective June 2013 to Dec. 9, 2013
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=708640
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=910634
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