CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has affirmed the New Hampshire Muni Bond Bank's (NHMBB) state guaranteed resolution bonds as follows:
--$3.8 million 1979 general resolution bonds at 'AA+'.
The Rating Outlook is Stable.
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 pledged of the state. A state-aid intercept and a state moral obligation on the reserve fund provide additional credit enhancement.
KEY RATING DRIVERS
STRONG LOAN SECURITY: All municipal loans are backed by a general obligation (GO) full faith and credit pledge of the state (GO debt rated 'AA+'; Stable Outlook) and the rating on the bonds is directly tied to the state's GO rating.
SOLID RESERVE INVESTMENTS: Cash funded debt service reserves ($1.5 million) 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, although never tested, and a moral obligation of the state to replenish the DSRF if it falls below its legal minimum.
NHMBB's state guaranteed loan portfolio has declined to only nine borrowers, down from 25 borrowers in 2009. The shrinkage of the state guaranteed loan portfolio results from bonds maturing and is likely to continue as no new money bonds have been issued under this program since 1997. Also, NHMBB does not expect new money issuance under this resolution in the future.
All state guaranteed municipal bond issues are scheduled to mature in 2018. Rather than fund loans to local government borrowers by issuing bonds under the state guaranteed program, the NHMBB has instead issued bonds under its non-state guaranteed 1978 (rated 'AA-'; Stable Outlook by Fitch) and 2005 (not rated by Fitch) resolutions.
Fitch's rating is primarily based on the state's GO full faith and credit pledge, which backs each loan under the 1979 bond 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 $1.5 million or 39.7% 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.
The portfolio consists of cities, towns, school districts and water and sewer districts that have financed certain projects which are allowed under the state guarantee resolution. North Conway Water Precinct is the largest borrower in the pool with an outstanding loan totaling $1.4 million or approximately 55.6% of the portfolio. Loan payments are due five days before the bond payment dates. NHMBB could charge borrowers 12% interest if a payment were late.
For more information on the state please see 'Fitch Rates New Hampshire's $100MM GO Bonds 'AA+', Oct. 18, 2011', available at 'www.fitchratings.com'.
Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
--'Revenue-Supported Rating Criteria' (June 12, 2012);
--'State Revolving Fund and Leveraged Municipal Loan Pool Criteria' (May 21, 2012);
--'Tax-Supported Rating Criteria' (Aug. 14, 2012);
--'U.S. State Government Tax-Supported Rating Criteria' (Aug. 14, 2012)
--'Rating Guidelines for State Credit Enhancement Programs' (June 19, 2012).
Applicable Criteria and Related Research:
Revenue-Supported Rating Criteria
State Revolving Fund and Leveraged Municipal Loan Pool Criteria
Tax-Supported Rating Criteria
U.S. State Government Tax-Supported Rating Criteria
Rating Guidelines for State Credit Enhancement Programs
Adrienne M. Booker, +1-312-368-5471
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Major Parkhurst, +1-512-215-3724
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Elizabeth Fogerty, +1-212-908-0526
Source: Fitch Ratings