As part of its continuous surveillance effort, Fitch Ratings affirms the 'AAA' ratings on the Massachusetts Water Pollution Abatement Trust's (New Bedford loan program) $5.89 million in outstanding revenue bonds, series 1996A and $98.5 million in outstanding subordinate revenue bonds, series 1998A. The Rating Outlooks are Stable.
The 'AAA' ratings for the Massachusetts Water Pollution Abatement Trust (MWPAT) New Bedford (or the city) program bonds reflect substantial debt service reserves within the MWPAT New Bedford program and deficiency funds generated by all of MWPAT's bond programs, which provide protection to the MWPAT New Bedford bonds even if the city were to default on its loan for an extended period of time.
MWPAT's New Bedford program debt service reserves are invested primarily in investment agreements, with providers rated at least in the second highest rated category and/or fully collateralized by direct U.S. Treasury or Agency securities with third-party custodians. The sustained credit quality of the reserve investments is important to maintaining the current 'AAA' ratings.
The MWPAT issues bonds to fund loans for its clean water and drinking water state revolving funds (SRF). The MWPAT has issued bonds under indentures for four separate programs, one each for New Bedford, South Essex Sewerage District, Massachusetts Water Resources Authority, and the MWPAT's larger state-wide pool program. The outstanding bonds were issued under New Bedford's standalone indenture to prevent borrower concentration in the state-wide pool program due to significant capital requirements associated with the city.
The primary security for the bonds is loan repayments from New Bedford. In addition, the MWPAT pays a portion of bond debt service with amounts received by the Commonwealth; these Commonwealth Assistance Payments result in a net maximum 2% interest rate to New Bedford. The senior lien bonds are further secured by debt service reserves at 50% of aggregate outstanding bond principal or maximum annual loan repayments, whichever is greater. The subordinate lien bonds reserve requirement is equal to 40% of aggregate outstanding bond principal. Currently, combined debt service reserves total approximately $41.7 million, or approximately 40% of outstanding bond principal.
As bonds amortize within MWPAT's four programs, a portion of the reserves are released to the deficiency fund and are available to cover debt service shortfalls within any of the trust's programs. In analyzing the MWPAT's state-wide pool program (rated 'AAA' with a Stable Rating Outlook by Fitch), Fitch estimates that at least $34 million will be released to the deficiency fund each year, even assuming loan losses within the state-wide pool consistent with what could be expected in a 'AAA' stress scenario. These deficiency funds, in combination with the New Bedford program's own debt service reserves, are sufficient for the New Bedford program bonds to perform, even if the city defaults on its loans for the life of the bonds.
Additional information is available at 'www.fitchratings.com'.
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE '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.
Contacts:
Fitch Ratings
Adrienne M. Booker, 312-368-5471, Chicago
David
Litvack, 212-908-0593, New York
or
Media Relations:
Cindy
Stoller, 212-908-0526, New York
Email: cindy.stoller@fitchratings.com