Fitch Ratings assigns an 'AAA' to approximately $30
million New Hampshire Municipal bond bank 2005 series A refunding
bonds and affirms the 'AAA' rating on approximately $803.6 million of
outstanding nonguaranteed bonds. The bonds are expected to sell on May
24 via negotiation by UBS Financial Services. Bond proceeds will be
used to refund outstanding revenue bonds to generate over $1 million
in present value debt service savings. The Rating Outlook is Stable.
Bonds are secured by loan repayments. The loan portfolio is diversified, with 209 borrowers from various cities, towns, counties, school districts, and other local government units throughout the state. All loans are backed by the borrowers' general obligation pledge. The Exeter Region Cooperative School District accounts for 7% of the total outstanding loan balance, and the top 10 borrowers constitute approximately 45% of the total outstanding loan balance. Approximately 65% of the loans outstanding are to school districts, each of which receive an allocation of the state property tax and many of which also receive 'adequate education grants' from the state.
Loan payments are due five days before the bond payment dates. The bond bank would charge borrowers 12% interest if a payment were late. Loans may not be refinanced, although the bond bank may issue refunding bonds and pass on interest savings to the local borrowers.
A reserve for all parity debt, funded by bond proceeds at 100% of maximum annual debt service, is available to make up shortfalls that could potentially occur due to any missed repayments. Including the series 2005A bonds, the reserve requirement plus excess cash available for loan defaults in fiscal 2005 will be equal to $96 million, or 11.9% of bonds outstanding.
Additional credit enhancement is provided by a state intercept, whereby, in the event a borrower defaults on a loan repayment, the bond bank has the ability to intercept any state funds payable to the borrower. An additional layer of support is a moral obligation of the state, albeit not a legal requirement, to replenish the debt service reserve if it falls below its minimum specified level. Neither the intercept nor the moral obligation has ever been utilized because no borrower has defaulted on a repayment since the bond bank began operations in 1977.
Fitch analyzed the default tolerance of the New Hampshire Bond Bank loan pool using a stress test it also applies to state revolving funds and other municipal loan pools. The stress test considers loan quality, single risk concentration, reserve fund size, and debt service requirements. The bond bank's reserve fund is sufficient to pay bonds even if scheduled loan repayments fall short by as much as 26.8% for four consecutive years and no action is taken by the state to replenish the reserve fund. A loan repayment shortfall this severe is consistent with what Fitch would expect to occur in an 'AAA' stress scenario, given the quality of the bond bank's loan pool.
Bonds are secured by loan repayments. The loan portfolio is diversified, with 209 borrowers from various cities, towns, counties, school districts, and other local government units throughout the state. All loans are backed by the borrowers' general obligation pledge. The Exeter Region Cooperative School District accounts for 7% of the total outstanding loan balance, and the top 10 borrowers constitute approximately 45% of the total outstanding loan balance. Approximately 65% of the loans outstanding are to school districts, each of which receive an allocation of the state property tax and many of which also receive 'adequate education grants' from the state.
Loan payments are due five days before the bond payment dates. The bond bank would charge borrowers 12% interest if a payment were late. Loans may not be refinanced, although the bond bank may issue refunding bonds and pass on interest savings to the local borrowers.
A reserve for all parity debt, funded by bond proceeds at 100% of maximum annual debt service, is available to make up shortfalls that could potentially occur due to any missed repayments. Including the series 2005A bonds, the reserve requirement plus excess cash available for loan defaults in fiscal 2005 will be equal to $96 million, or 11.9% of bonds outstanding.
Additional credit enhancement is provided by a state intercept, whereby, in the event a borrower defaults on a loan repayment, the bond bank has the ability to intercept any state funds payable to the borrower. An additional layer of support is a moral obligation of the state, albeit not a legal requirement, to replenish the debt service reserve if it falls below its minimum specified level. Neither the intercept nor the moral obligation has ever been utilized because no borrower has defaulted on a repayment since the bond bank began operations in 1977.
Fitch analyzed the default tolerance of the New Hampshire Bond Bank loan pool using a stress test it also applies to state revolving funds and other municipal loan pools. The stress test considers loan quality, single risk concentration, reserve fund size, and debt service requirements. The bond bank's reserve fund is sufficient to pay bonds even if scheduled loan repayments fall short by as much as 26.8% for four consecutive years and no action is taken by the state to replenish the reserve fund. A loan repayment shortfall this severe is consistent with what Fitch would expect to occur in an 'AAA' stress scenario, given the quality of the bond bank's loan pool.
© 2005 Business Wire
