Fitch Ratings assigns an 'A+' rating to $50 million
State of Ohio taxable development assistance bonds, series 2005A
(research and development program), expected to sell Oct. 19 through
negotiation with a syndicate led by KeyBanc Capital Markets. Fitch
also affirms the underlying 'A+' rating on $315 million outstanding
development assistance and revitalization project bonds issued under
chapters 166 and 151 of Ohio statutes.
Chapter 166 bonds are secured by a first-priority pledge of the profits of the State of Ohio from its sale of spirituous liquor. Operating through 423 agent stores receiving commissions, Ohio's state liquor monopoly controls all sales of liquor with more than 21% alcohol by volume, which excludes beer and wine. The healthy level of coverage provided by profits of the enterprise, as well as their recent strong growth, support the rating. Fiscal 2005 pledged profits provide 2.5 times (x) coverage of authorized maximum debt service for bonds of the senior lien chapter 166 loan program and the subordinate chapter 151 program. A recent cut in the discount for wholesale liquor purchases from 12.5% to 6%, which became effective July 1, 2005, is expected to increase profits going forward. Risks include the narrow and discretionary nature of the revenue source, which may prove volatile if changes occur in purchasing habits, prices, or state and federal taxation.
Recent trends in sales and profitability for the liquor enterprise have been strong. Sales, profits, and consumption all have increased steadily since 1996, as distillers have increased prices and marketed premium products effectively. In fiscal 2005, gallons sold increased 4%, and profits were up 5.2% to $165 million. Fiscal 2006 profits are estimated to rise 9.7% to $181 million, reflecting the reduction in the wholesale discount.
The rating reflects current authorized amounts under the chapters 166 and 151 bonding programs. Several limits on bonding currently exist, including a $45 million limit on maximum annual debt service for chapter 166 bonds. Chapter 151 debt is limited to $200 million, debt service on which is estimated at approximately $20 million annually. Chapter 151 debt service is paid on a subordinate basis after that of chapter 166 debt. After this issue, fiscal 2005 liquor profits will cover maximum annual chapter 166 debt service by 5.46x. Maximum combined chapter 166 and 151 debt service, following an expected new subordinate issue in a few months, will be covered by fiscal 2005 liquor profits by 4.14x.
The bonds will mature Oct. 1, 2006-2025. Call provisions are yet to be determined.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
Chapter 166 bonds are secured by a first-priority pledge of the profits of the State of Ohio from its sale of spirituous liquor. Operating through 423 agent stores receiving commissions, Ohio's state liquor monopoly controls all sales of liquor with more than 21% alcohol by volume, which excludes beer and wine. The healthy level of coverage provided by profits of the enterprise, as well as their recent strong growth, support the rating. Fiscal 2005 pledged profits provide 2.5 times (x) coverage of authorized maximum debt service for bonds of the senior lien chapter 166 loan program and the subordinate chapter 151 program. A recent cut in the discount for wholesale liquor purchases from 12.5% to 6%, which became effective July 1, 2005, is expected to increase profits going forward. Risks include the narrow and discretionary nature of the revenue source, which may prove volatile if changes occur in purchasing habits, prices, or state and federal taxation.
Recent trends in sales and profitability for the liquor enterprise have been strong. Sales, profits, and consumption all have increased steadily since 1996, as distillers have increased prices and marketed premium products effectively. In fiscal 2005, gallons sold increased 4%, and profits were up 5.2% to $165 million. Fiscal 2006 profits are estimated to rise 9.7% to $181 million, reflecting the reduction in the wholesale discount.
The rating reflects current authorized amounts under the chapters 166 and 151 bonding programs. Several limits on bonding currently exist, including a $45 million limit on maximum annual debt service for chapter 166 bonds. Chapter 151 debt is limited to $200 million, debt service on which is estimated at approximately $20 million annually. Chapter 151 debt service is paid on a subordinate basis after that of chapter 166 debt. After this issue, fiscal 2005 liquor profits will cover maximum annual chapter 166 debt service by 5.46x. Maximum combined chapter 166 and 151 debt service, following an expected new subordinate issue in a few months, will be covered by fiscal 2005 liquor profits by 4.14x.
The bonds will mature Oct. 1, 2006-2025. Call provisions are yet to be determined.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
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