Fitch Affirms Oklahoma Development Finance Authority (Goodyear Project) Bonds at 'A+'

NEW YORK--(BUSINESS WIRE)--In the course of routine surveillance, Fitch Ratings affirms the 'A+' rating on the $27.9 million outstanding Oklahoma Development Finance Authority industrial development taxable revenue bonds, series 2004 (Goodyear Project). The Ratings Outlook is Stable.

The 'A+' rating reflects the security provided by state personal income taxes withheld by Goodyear Tire and Rubber Co. for its Lawton, OK employees and by a back-up allocation of statewide corporate income taxes. Corporate income taxes would not be allocated to the bonds until 60 days after funding deficiencies occur. The state's credit enhancement reserve fund will provide a policy fulfilling the reserve fund requirement equal to 50% of maximum annual debt service. Under Oklahoma's constitution, the state may issue general obligation bonds up to $100 million to capitalize the reserve fund, which now has unused reserve capacity of $30.1 million.

An act encouraging job creation authorized the bonds with bond proceeds funding a $250 million expansion project at a 2,600-employee Goodyear tire manufacturing facility in Lawton. Final maturity of these bonds is July 1, 2017 with annual debt service around $3.9 million. Under this state program, the intended sources for bond payment include two revenue streams. The first funds are incentive payments otherwise payable to Goodyear for job creation, which do not cover debt service. The second are the employee withholdings, which currently cover debt service by 1.68 times (x) around the same level as the time the bonds were originally issued. If these sources prove insufficient, Goodyear agrees to cover the deficiency, although this guaranty was not a factor in the rating. If funds provided from all of these sources are insufficient, Oklahoma law allocates the corporate income taxes.

Corporate income taxes often display volatility, but coverage in this case is ample. Net receipts from Oklahoma's 6% corporate income tax ranged from $227 million in fiscal 1997 to $557.7 million in fiscal 2007 before declining to $360.1 million in fiscal 2008 as a result of economic sluggishness, projected to rise 3% to $371 million in fiscal 2009. Fiscal 2008 corporate income tax receipts cover projected debt service on this and the similarly secured Michelin tire company project bonds by over 50x, although the state could pledge this revenue to other bonds in the future. An April 2004 state Supreme Court decision declared the bonds constitutional but noted that the legislature could change the structure of the taxes, including the withholdings, dedicated to bond payment.

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