Fitch Rates Garland, TX $18.3MM Water and Sewer Revs 'AA'
Source: Business Wire
-- $1.97 million 1993 series A bonds;
-- $310,000 1993 series B bonds;
-- $440,000 1993 series C bonds;
-- $2.17 million 1994 Series A bonds;
-- $290,000 1995 series A bonds;
-- $2.19 million 1996 series A bonds;
-- $2.15 million 1996 series one & two bonds.
In addition, Fitch downgrades and removes from Rating Watch Negative the following OECDD governmental purpose bonds to 'AA-' from 'AA':
-- $6.15 million 1997 series A bonds;
-- $3.91 million 1998 series A bonds;
-- $3.24 million 1998 series B bonds;
-- $4.73 million 1999 series A bonds;
-- $14.83 million 2000 series A bonds;
-- $8.65 million 2000 series B bonds;
-- $5.45 million 2002 series A bonds;
-- $22.24 million 2002 series B bonds;
-- $21.34 million 2003 series A bonds;
-- $5.61 million 2004 series A bonds;
-- $25.52 million 2007 series A bonds;
-- $8.58 million 2007 series B bonds.
The Rating Outlook on all the above bonds is Stable.
While the original rating for the (Special Public Works Fund) revenue bonds series 1993-A was assigned Nov. 5, 1992, the rating was not reflected on Fitch's website. With this affirmation the full rating history is now available on Fitch's website.
Fitch had placed the above bonds on Rating Watch Negative on July 7, 2008, after its withdrawal of the Insurer Financial Strength (IFS) rating of MBIA Insurance Corp. and Ambac Assurance Corp, two of the bond bank's surety providers. Both insurers have experienced severe credit deterioration over the last year and a half.
In conjunction with the upcoming sale of the bond bank's 2009 series A bonds (not rated by Fitch), the master trust indenture is being amended primarily to create certain separately secured debt service reserve subaccounts. All the bonds retain a common claim on all of the program's loan repayments. In addition to the program's loan repayments, the series 1993-1996 bondholders (pre-1997 bonds) benefit from a common cash funded debt service reserve totaling $1.89 million or 19.98% of pre-1997 bonds outstanding. The 1997-2007 bonds are secured by the same loan repayments, but their debt service reserves are funded by sureties from MBIA or Ambac, rather than by cash. The downgrade of the 1997-2007 bonds reflects the fact that Fitch assigns no value to the MBIA and Ambac sureties, due to the low quality of the providers.
The ratings on OECDD's bonds incorporate its diversified loan portfolio and sound loan underwriting standards, which include a thorough assessment of loan security pledge, sufficiency of funds and project feasibility. The overall pledged loan pool comprises over 100 borrowers. Approximately half of the borrowers are estimated to exhibit investment-grade characteristics. The city of Newberg is the largest borrower, representing 10% of the total pledged loan pool (after the sale of the 2009 series A issue). The pool's largest 10 borrowers comprise 46% of the portfolio.
All borrowers are unconditionally obligated to pay the amounts due under the separate loan agreements. Loan security generally includes one or a combination of the following: general fund, ad valorem property taxes, any lawfully available fund pledges and net revenues of water or sewer system enterprises. Approximately 50% of all loans currently fund water and wastewater treatment improvements. The bond bank requires the revenue-secured loans to maintain a minimum 1.1 times (x) coverage. In addition to revenue, general fund, or other pledges, OECDD may request that the state divert revenue due to a local government in the event that the respective entity defaults on its loan obligation.
Pledged loan repayments are projected to provide approximately 1.2x debt service coverage over the next 26 years. However, the OECDD's master indenture allows the program to be leveraged down to 1.1x debt service coverage if no additional bonds have been issued for at least 10 years.
Administered by OECDD, the Oregon Bond Bank funds infrastructure loans to localities statewide through three main programs: special public works; community facilities; and water/wastewater. By policy, 83% of each loan is funded with bond proceeds with the remaining 17% funded by a collateral loan that is made with state lottery revenue-the bond bank's main source of capital. Both loans are pledged as security for debt service, as well as the repayments from direct loans made during the initial institution of the bond bank.
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.
Contact:
Fitch Ratings
Adrienne M. Booker, +1-312-368-5471 (Chicago)
Ken Weinstein, +1-212-908-0571 (New York)
Cindy Stoller, +1-212-908-0526 (Media Relations, New York)
cindy.stoller@fitchratings.com
