08.11.2012 05:09
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Moody's assigns A1 underlying and Aaa enhanced ratings to Somerset ISD's (TX) Unlimited Tax Refunding Bonds, Series 2012; Aaa based on Texas PSF

A1 rating affects $6.965 million in refunding bonds

New York, November 07, 2012 -- Moody's Rating

Issue: Unlimited Tax Refunding Bonds, Series 2012; Underlying Rating: A1; Enhanced Rating: Aaa; Sale Amount: $6,965,000; Expected Sale Date: 11/16/2012; Rating Description: General Obligation

Opinion

Moody's Investors Service has assigned an A1 rating to Somerset Independent School District's (TX) $6,965,000 Unlimited Tax Refunding Bonds, Series 2012. In addition to the underlying rating, we have assigned a Aaa enhanced rating to the current sale provided by a guarantee of the Texas Permanent School Fund (PSF).

RATING RATIONALE - UNDERLYING

The bonds, which are secured by an unlimited ad valorem tax on all taxable property within the district, will be used to refund existing debt for an estimated 31.5% net present value savings. Assignment of the A1 rating reflects the district's modestly sized tax base, sound financial management practices resulting in a healthy fund balance position, state aid revenues that support debt service and maintenance and operations, and an above average debt burden.

RATINGS RATIONALE - ENHANCED

The Aaa rating reflects our assessment of the PSF's ability to make payments on the guarantee relative to the substantial value of the fund corpus. Additional credit considerations include: the PSF's constitutionally protected corpus, the general obligation credit quality of the Texas school district guaranteed by the fund, an investment portfolio that provides satisfactory coverage and liquidity given our estimated probability of calls on the guarantee, and strong legal mechanics that facilitate timely reimbursement to the PSF should guarantee payments occur. The enhanced rating also reflects an expected increase in PSF leverage to no more than 3.5 times PSF cost value. For additional information on the PSF program, please see Moody's High Profile Ratings Update "Texas Permanent School Fund (PSF)" dated September 2011.

STRENGTHS: *Strong financial reserves *Relatively stable and local economy with rebounding taxable values

CHALLENGES:

*Above average direct debt burden

*Recent declines in tax base

WHAT COULD CHANGE THE RATING - UP

Tax base growth coupled with improved economic strength

Improvement in the district's socioeconomic profile

WHAT COULD CHANGE THE RATING - DOWN

Further declines in district's tax base

Trend of declining general fund reserves

RATING METHODOLOGY

The principal methodology used in this rating was General Obligation Bonds Issued by U.S. Local Governments published in October 2009. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody'sInvestors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Information sources used to prepare the rating are the following: parties involved in the ratings, parties not involved in the ratings, and public information.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.

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Luke Dalton Lybrand Associate Analyst Public Finance Group Moody'sInvestors Service, Inc.600 North Pearl Street Suite 2165 Dallas, TX 75201 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653Toby Cook Vice President - Senior Analyst Public Finance Group JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Releasing Office: Moody's Investors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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