New York, November 21, 2012 -- Moody's Rating
Issue: 2012 Series D Bonds; Rating: Aa3; Sale Amount: $8,700,000; Expected Sale Date: 11-29-2012; Rating Description: General Obligation
Moody's Investors Service has assigned a Aa3 rating to the New Hampshire Municipal Bond Bank's$8.7 million 2012 Series D Bonds. The outlook for the bond bank's 1978 resolution is stable. The Aa3 rating applies to $696.8 million of outstanding parity debt issued under the bond bank's 1978 resolution, including the current issue. Proceeds of the bonds will fund loans to New Hampshire local governments for the purpose of refunding US Department of Agriculture (USDA) loans the municipalities had incurred previously, as well as to deposit additional moneys into the debt service reserve fund (DSRF) securing the 1978 resolution bonds.
The bond bank also has bonds issued under two other resolutions. Under the 1979 State Guaranteed Municipal Bond Issue Resolution, the bond bank currently has $3.7 million of bonds outstanding, which carry a Aa1 rating and stable outlook, equivalent to the state's GO rating. Under the 2005 General Resolution, the most recent resolution, the bank currently has $231.2 million of bonds outstanding, rated A1 with a stable outlook.
SUMMARY RATINGS RATIONALE
The Aa3 rating reflects the application of our methodology for pool program debt. The methodology's key rating factors and weights assigned to each factor are as follows; underlying credit quality and default tolerance (50%); pool size and diversity (15%); debt structure and legal covenants (20%); and management and governance (15%). The methodology states that for pool program structures that include a moral obligation pledge of their respective states to replenish a draw on the debt service reserve fund (DSRF) in the event of a loan repayment deficiency, we will compare the credit quality of moral obligation pledge to the underlying pool program rating and apply the higher of the two. In this case, we have determined the credit quality of the moral obligation pledge to be higher than the pool program rating assigned through the application of the U.S. Municipal Pool Program Debt methodology. It is two notches below the state's general obligation bond rating of Aa1 with a stable outlook.
Also factored into our assessment of the rating is the long and successful operating history of the bond bank (since 1977), which has pledged its general obligation; active oversight of loan repayments; the medium-grade credit quality and history of timely debt payments of a sizable pool of borrowers that have secured their borrowings with general obligation, unlimited tax pledges; the reserve funds available to cure a potential participant delinquency; and a state-intercept provision which provides for state funds due to a borrower to be paid directly to the bond bank in case of non-payment by a borrower.
- State moral obligation pledge
- Large pool of over 150 borrowers
- Strong legal security including underlying GO pledges
- Cash funded debt service reserve
- Exposure to fiscal pressures at state level due to state moral obligation pledge
- Average creditworthiness of borrower pool
- Limited liquidity outside of debt service reserve fund
WHAT COULD MAKE THE RATING GO UP
-An upgrade of the state's general obligation or moral obligation rating
-Improvement in the credit strength and loan diversity of the underlying pool of borrowers
WHAT COULD MAKE THE RATING GO DOWN
-A downgrade of the state's general obligation or moral obligation rating would trigger a commensurate downgrade
The principal methodology used in this rating was U.S. Municipal Pool Program Debt published in August 2010. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.
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Michael D'Arcy Analyst Public Finance Group Moody'sInvestors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Geordie Thompson VP - Senior Credit Officer 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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