Fitch Upgrades Alaska Muni Bond Bank Authority $56 Million Revenue Bonds to 'A+'SAN FRANCISCO - (BUSINESS WIRE, Oct. 12) - In the course of routine surveillance, Fitch Ratings has upgraded the following bonds issued by the Alaska Municipal Bond Bank Authority (the authority, or AMBBA) to 'A+' from 'A':
--$400,000 series 2000B (Seward loan);
--$3 million series 2001A and B (Ketchikan Gateway Borough loan);
--$3.5 million series 2002A (Ketchikan loan);
--$17 million series 2003B (Valdez loan);
--$27.3 million series 2004A (Juneau loan);
--$5 million series 2004B (Anchorage loan).
The Rating Outlook for all series is Stable.
The upgrades reflect the state of Alaska's ongoing and enhanced commitment to use the authority to assist Alaska local governments in achieving market access, as evidenced by recent changes to a new authority program. Also, the upgraded credits are backed by local government loans that now are seasoned. The ratings also reflect several layers of bondholder security, with authority enhancements added to the individual municipality's revenue bond pledge, and AMBBA's strong repayment history. To date, no municipality has defaulted on a loan repayment under either the revenue or general obligation bond program. As a result, the state aid withholding and moral obligation mechanisms have not been used.
The revenues pledged vary by issuer, and include airport net revenues, hospital net revenues, performance ticket surcharges, and boat harbor docking fees. While Fitch would rate several of these underlying securities below investment grade, the AMBBA enhancements significantly improve the credit quality. The enhancements include the authority's ability to intercept state aid provided to any borrowing entity that defaults on its revenue bond repayment and invades the authority level debt service reserve fund, and a state moral obligation to replenish a draw on the authority level debt service reserve fund, if withheld state aid funds are not sufficient. All but the series 2004B bonds also have a fully funded debt service reserve for the municipal borrower's loan repayment obligation to the authority. The moral obligation mechanism calls for the AMBBA to notify the governor of any deficiency in the authority level debt service reserve fund and for the governor to request that the legislature appropriate funds to replenish it, although the legislature is not obligated to do so.
AMBBA recently issued bonds for the combined general obligation and revenue bond program which Fitch rated 'AA-'. This rating reflects certain strengths added to the repayment structure, most important being the inclusion of an appropriation for an AMBBA debt service reserve replenishment in the state's annual budget. While this addition does not affect the outstanding revenue bonds, it further indicates the state's intent to assist in providing market access for local governments. Fitch views this stronger commitment as increasing the likelihood that the moral obligation provided to the revenue bond program will be honored, if needed.
Additional information is available at www.fitchratings.com.
Posted: October 12, 2009
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