Fitch Rates $300MM Missouri Third Lien State Road Bonds 'AA-'; Outlook Stable.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. assigns an 'AA-' rating to the Missouri Highways State highways in Missouri were first designated in 1922 and Missouri's system was used (along with Wisconsin's) as a plan for the entire U.S. Highway System which was created in 1926. and Transportation Commission's (commission) $300,000,000 third lien lien, claim or charge held by one party, on property owned by a second party, as security for payment of some debt, obligation, or duty owed by that second party. state road bonds, expected to consist of $50,000,000 tax-exempt third lien state road bonds, series C 2009, and $250,000,000 taxable third lien state road bonds (Build America Bonds) series D 2009; precise par amounts for each series will be determined upon final sale. The bonds are scheduled for sale on or about Oct. 27 through negotiation. Series C 2009 consists of serial bonds and will mature May 1, 2017-2020; series D 2009 bonds consists of serials and term bonds and will mature May 1, 2021-2024 and May 1, 2029. Optional redemption provisions have yet to be determined. The Rating Outlook is Stable. The third lien bonds now offered are the last planned new bond issuance under the voter-approved Amendment 3 program, which became effective on July 1, 2005. Bonds issued pursuant to Amendment 3 are special revenue obligations of the commission, payable from: (1) revenue from various highway user fees and taxes, including motor fuel taxes, constitutionally dedicated for highway purposes and deposited in the state road fund (the original fund), and (2) the portion of the motor vehicle sales tax sales tax, levy on the sale of goods or services, generally calculated as a percentage of the selling price, and sometimes called a purchase tax. It is usually collected in the form of an extra charge by the retailer, who remits the tax to the government. deposited in the state road bond fund (the new fund). Pledged revenues equal about $631 million in the original fund and $88 million in the new fund, based on fiscal 2009 revenues. Moneys in the original fund stand appropriated for highway purposes without requiring further legislative action; moneys in the new fund must be appropriated but can only be used for transportation. The commission closed the lien on $666 million in outstanding state road bonds issued under a 2000 indenture An agreement declaring the benefits and obligations of two or more parties, often applicable in the context of Bankruptcy and bond trading. The term indenture primarily describes secured contracts and has several applications in U.S. law. , which have a claim on original fund revenues senior to that of the Amendment 3 bonds but no claim on new fund revenues. Additional bond issuance under the third lien requires 2.0 times (x) historical coverage of maximum annual debt service (MADS), with a stronger debt service coverage test of 3.0x under commission policy. First lien bonds under the same indenture require an even stronger 4.0x historical coverage of MADS and an internal policy test of 5.0x, the strictest test of any bonds backed by state highway user fees and taxes rated by Fitch; second lien A Second lien financing is a form of financing secured on a second ranking basis by (more or less) the same security, which secures the first ranking financing. The first lien lenders and the second lien lenders agree that, in the event of a security enforcement or bankruptcy, the bonds require 3.0x historical coverage of MADS and an internal policy test of 4.0x. Current revenue assumptions would preclude further issuance under both the first and second liens based on internal policy tests. In addition, commission policy limits total annual debt service for state road bonds to 20% of federal and state revenues. After covering debt service on state road bonds, revenues of the original fund and new fund are pledged on a subordinate basis to federal grant anticipation revenue (GARVEE GARVEE Grant Anticipated Revenue Vehicle (debt financing instruments for state highways) ) bonds issued by the commission (rated 'AA-', Outlook Stable by Fitch). Amendment 3 enhanced the commission's ability to fund highway system construction and reconstruction projects by dedicating new revenues to transportation and minimizing the diversion of existing dedicated revenues. It also essentially changed a net pledge to a gross pledge by moving annual highway operational costs below the pledge of the original fund to bondholders. Payments for DOT retirement and for enforcement of motor vehicle laws remain ahead of bondholder Bondholder A firm often has stockholders and bondholders. In a liquidation, the bondholders have first priority. bondholder An individual or institution that owns bonds in a corporation or other organization. payments. Highway user fees and taxes historically have been a relatively stable revenue stream, but have weakened during the current downturn. Revenues to the state road fund declined 8.1% in fiscal year (FY) 2009, to $631 million, mainly due to economic weakness, and are forecast to fall 3.3% in FY 2010, to $611 million, due to budgeted increases in retirement and enforcement expenses. Motor fuel taxes, which constitute nearly 55% of pledged revenues, declined 4.1% in FY 2009 and are forecast to rise 0.9% in FY 2010. Coverage of maximum debt service on the bonds is expected to be maintained at high levels given the need to fund operational costs after the claim of bondholders and the strong additional bonds test Additional bonds test A test for ensuring that bond issuers can meet the debt service requirements of issuing any new additional bonds. additional bonds test . Additional transportation revenues may be pledged to the bonds with future issuances and included in additional bonds test calculations, to a maximum of 5% of pledged revenues. Following the new bonds, future new issuance is expected to be limited to the GARVEE program; the commission is working to identify other sources of transportation funding. The State of Missouri serves as collection agency for all highway user revenues, and provides administrative control Direction or exercise of authority over subordinate or other organizations in respect to administration and support, including organization of Service forces, control of resources and equipment, personnel management, unit logistics, individual and unit training, readiness, mobilization, over fund resources. Fitch rates Missouri's general obligation bonds 'AAA', Outlook Stable. Fitch also affirms the ratings of outstanding commission state road bonds, including the 'AA+' rating on $971 million in first lien state road bonds, the 'AA' rating on $517 million in second lien state road bonds, the 'AA-' rating on $58.9 million third lien state road bonds, and the 'AA+' on $666 million state road bonds (2000 indenture). The Rating Outlook is Stable. Additional information is available at www.fitchratings.com. 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