Fitch Ratings expects to publish new rating criteria for State Revolving Funds (SRFs) and Leveraged Municipal Loan Pools (MLPs) within the next few weeks. Upon publication, Fitch will establish the date on which the new criteria will become effective for all new ratings related to SRFs and MLPs. In addition, within six months of the effective date of the new criteria, Fitch will conduct a review of its entire SRF and MLP rated portfolio. Despite the revisions contained within Fitch's new criteria, limited changes to existing ratings are expected. However, it is possible that certain credits, particularly those with minimal equity or structural enhancements, may be affected negatively.
Fitch's new criteria primarily revise its quantitative approach to rating SRFs and MLPs. Significant changes include the introduction of Fitch's Portfolio Stress Calculator (the PSC), which replaces the matrix-driven stress test used in previous criteria, and the incorporation of Fitch's internal Cash Flow Model (CFM).
The PSC derives program rating stresses based on overall pool credit quality as measured by the rating of underlying borrowers, loan terms and portfolio concentration. Fitch's CFM is used to measure the level to which a program's structural enhancement or equity is sufficient to cover the default stresses produced by the PSC. Qualitative aspects of Fitch's criteria remain intact from previous publications and include analysis of the legal structure of the pool and loans providing the underlying security as well as management practices of the issuer.
More information will be made available upon the release of Fitch's full criteria report.
Additional information is available at 'www.fitchratings.com'.
--Revenue-Supported Rating Criteria, June 20, 2011
--State Revolving Fund and Leveraged Municipal Loan Pool Rating Criteria, Aug. 15, 2011
Applicable Criteria and Related Research:
Revenue-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=637130
State Revolving Fund and Leveraged Municipal Loan Pool Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648902
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