Fitch Upgrades Monroe County NY IDA School Facility Rev Bonds to 'AA'; Outlook Stable
NEW YORK--(BUSINESS WIRE)--Fitch Ratings upgrades to 'AA' from 'AA-' its rating on the following Monroe County NY Industrial Development Agency (IDA) bonds:
--Approximately $224 million school facility revenue bonds (Rochester schools modernization project), series 2012A, 2012B, and 2013.
The Rating Outlook is Stable.
The bonds are secured solely by state aid revenues annually appropriated to the district by the state of New York and remitted to the district from the period Dec. 1 through March 31 (the collection period).
The funds are subject to appropriation as lease payments by the district and the district's budget is subject to approval by the city of Rochester. Lease rental payments are not subject to offset, counterclaim, or reduction. The district's general obligation (GO) is not pledged.
In the event that the district fails to appropriate state aid sufficient to cover debt service payments by Nov. 10, state aid sufficient to cover the subsequent principal and two interest payments will be intercepted and forwarded to the trustee. As intercepted state aid is not subject to appropriation by the district, this provision effectively removes the risk to bondholders of non-appropriation by the district.
KEY RATING DRIVERS
UPGRADE BASED ON NY STATE: The upgrade to 'AA' with a Stable Outlook reflects Fitch's upgrade of and Outlook on the state's general obligation (GO) and related debt.
RATING BASED ON STATE INTERCEPT: The one notch distinction between the IDA's bond rating and Fitch's 'AA+' GO bond rating on the state of New York reflects the security provided by the state aid intercept. Bondholders benefit from remittance of state aid to a depository fund from which debt service is set aside before flowing to the district and, in the event of a failure to appropriate, a state aid intercept structure that provides for pre-default payment.
STRONG COVERAGE: Interceptable state aid provides strong coverage of maximum annual debt service (MADS) on the current issue and on total authorized borrowing. Fitch believes that coverage from state aid may decline in the coming years due to the district's extensive capital and borrowing plans, charter school competition and declining enrollment; however, Fitch expects coverage levels to remain strong.
CHANGE IN NEW YORK'S GO RATING: This rating is sensitive to a change in the state's GO rating or Outlook, to which these bonds are linked.
MATERIAL WEAKENING IN COVERAGE LEVELS: The rating assumes continued strong coverage of debt service by interceptable state aid.
For more information on the state's GO rating, see Fitch's press release 'Fitch Upgrades New York State GO and Related Bonds to 'AA+' Outlook Stable', dated June 20, 2014, available on the Fitch web site at 'www.fitchratings.com'.
For more information on the school facility revenue bond rating, see Fitch's press release 'Fitch Affirms Monroe County NY IDA School Facility Rev Bonds at 'AA-'; Outlook Positive' dated May 13, 2014, available on the Fitch web site at 'www.fitchratings.com'.
Additional information is available at 'www.fitchratings.com'.
In addition to the sources of information identified in Fitch's Tax-Supported Rating Criteria, this action was additionally informed by information from Creditscope, University Financial Associates, S&P/Case-Shiller Home Price Index, IHS Global Insight, National Association of Realtors.
Applicable Criteria and Related Research:
--'Tax-Supported Rating Criteria' (Aug. 14, 2012);
--'U.S. Local Government Tax-Supported Rating Criteria' (Aug. 14, 2012).
--'U.S. State Government Tax-Supported Rating Criteria' (Aug. 14, 2012);
--'Fitch Upgrades New York State GO and Related Bonds to 'AA+' Outlook Stable' (June 20, 2014);
--'Fitch Affirms Monroe County NY IDA School Facility Rev Bonds at 'AA-'; Outlook Positive' (May 13, 2014);
--'Rating Guidelines for State Credit Enhancement Programs', (April 18, 2013).
Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
U.S. Local Government Tax-Supported Rating Criteria
U.S. State Government Tax-Supported Rating Criteria