According to Fitch Ratings, the swaption transaction executed by Dayton City School District, Ohio on its unlimited tax, general obligation (GO) series 2003A and 2003D bonds introduces a degree of risk for the district's financial profile. While the district's rating currently remains 'A-' with a Stable Rating Outlook, Fitch notes that the swaption may limit the district's future financial flexibility.
Chief credit concerns include added financial exposure resulting from future termination payments in the event the swaption is exercised and the district's ability to access the short-term market to sell the proposed bond anticipation notes upon exercise of the swaption. The district has mitigated Fitch's concern of future short-term market access to some extent by qualifying in the state's school credit enhancement program (rated 'AA-' with a Stable Outlook by Fitch) which would enable it to refinance maturing notes with long-term bonds. Fitch believes execution of a swaption given the recent market turmoil associated with swaps and other derivative products and the continued volatility associated with interest rate spreads may make the district vulnerable to future financial stresses, in addition to its already significantly pressured fiscal position.
Fitch will continue to monitor the credit profile of the school district through its process of surveillance.
For more information on the district's general obligation rating, please see rating action commentary 'Fitch Downgrades Dayton City School District, Ohio's Bonds to 'A-'; Outlook Stable' dated Oct. 6, 2008, available on the Fitch Ratings web site at 'www.fitchratings.com'.
Additional information is available at 'www.fitchratings.com'.
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Contacts:
Fitch Ratings
Melanie A.J. Shaker, 312-368-3143, Chicago
Ann
Flynn, 212-908-9152, New York
or
Media Relations:
Cindy
Stoller, 212-908-0526, New York
Email: cindy.stoller@fitchratings.com
