Fitch Rates Michigan Municipal Bond Authority's $275MM SRF Revs 'AAA'; Outlook Stable.CHICAGO -- 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 'AAA' to the Michigan Municipal Bond Authority's (MMBA MMBA Michigan Mountain Biking Association (Waterford, Michigan) MMBA Master Mariners Benevolent Association MMBA Mississippi Malt Beverage Association MMBA Miles and Miles of Bloody Africa MMBA Maine Mud Bog Association ) $275 million clean water revolving fund revenue bonds, series 2007. Fitch also affirms the 'AAA' rating on MMBA's $1.78 billion outstanding state revolving fund (SRF SRF abbr. somatotropin-releasing factor ) program bonds. The bonds are scheduled to sell via negotiation during the week of Oct. 8 through a syndicate led by Citi. The series 2007 bond proceeds will fund loans to municipal borrowers in Michigan for wastewater infrastructure projects. The Rating Outlook is Stable. The bonds are rated 'AAA' due to the strong security provided by a high-quality loan portfolio and substantial reserves, enabling them to perform even under severe stress scenarios. The cross-collateralization feature, which allows excess reserves Excess reserves Amount of reserves held by an institution in excess of its reserve requirement and required clearing balance. Also see reserves. Excess reserves Actual reserves that exceed required reserves. in the clean water state revolving fund (CWSRF CWSRF Clean Water Act State Revolving Fund ) and drinking water drinking water supply of water available to animals for drinking supplied via nipples, in troughs, dams, ponds and larger natural water sources; an insufficient supply leads to dehydration; it can be the source of infection, e.g. leptospirosis, salmonellosis, or of poisoning, e.g. state revolving fund (DWSRF DWSRF Drinking Water State Revolving Fund (United States) ) programs to be lent to the other program, provides additional credit stability. The rating also reflects MMBA's strong investment guidelines and conservative underwriting practices. Revolving fund bonds are well secured by loan repayments from a diverse pool, which has over 150 borrowers. Bonds are also secured by large reserves. Federal capitalization grants and state matching funds, mainly from state appropriations and state match bonds, are directed into a reserve fund for each of the two loan programs, with each reserve fund maintained at a minimum of 50% of outstanding bond principal for new money bonds. The reserves are invested in guaranteed investment contracts Guaranteed investment contract (GIC) A pure investment product in which a life company agrees, for a single premium, to pay at a maturity date the principal amount of a predetermined annual crediting (interest) rate over the life of the investment. (GICs) that meet Fitch's 'AAA' rating guidelines providing significant rate subsidies to underlying borrowers. The City of Detroit (sewage disposal system senior and second-lien revenue obligations rated 'A+' and 'A', respectively by Fitch) is the largest borrower, comprising 24% of the portfolio. Detroit should remain the largest single program participant due to significant future capital needs associated with combined sewer overflow projects. Concerns about Detroit's pool concentration are mitigated, to some extent, by MMBA's ability to limit a borrower's participation to 30% of available funds in any given year. The authority can also provide loans to borrowers in its other non-leveraged portfolios. Borrower quality for the portfolio remains strong as MMBA employs conservative underwriting practices. Over 90% of the combined pool participants are of investment-grade quality as exhibited by public investment-grade ratings from one of the nationally recognized rating agencies. Borrowers that do not have public investment-grade ratings are required to demonstrate investment-grade characteristics through bond insurance, state credit support, or private investment-grade rating letters. Reserves provide significant enhancement allowing the bonds to withstand borrower defaults of 100% during the first four-year period, exceeding Fitch's 'AAA' stress test requirements given the size and credit quality of the loans. Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. 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 Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from the 'Code of Conduct' section of this site. |
|
||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion