Fitch Rates NH Municipal Bond Bank State Guaranteed Bonds 'AAA'.Business Editors NEW YORK--(BUSINESS WIRE)--Dec. 16, 2003 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 approximately $5.4 million New Hampshire New Hampshire, one of the New England states of the NE United States. It is bordered by Massachusetts (S), Vermont, with the Connecticut R. forming the boundary (W), the Canadian province of Quebec (NW), and Maine and a short strip of the Atlantic Ocean (E). Municipal Bond Bank 2003 series G refunding bonds refunding bond A bond that is issued for the purpose of retiring an outstanding bond. Issuers refund bond issues to reduce financing costs, eliminate covenants, and alter maturities. See also crossover refunding bonds, prerefunding. (State Guaranteed Municipal Bonds Issue), and affirms its 'AAA' rating on approximately $70.5 million of outstanding guaranteed bonds Guaranteed Bond A type of bond in which the interest and principal on the bond are guaranteed to be paid by a firm other than the issuer of the bond. Notes: This guarantee limits the impact on bondholders if the issuer of the bond goes into default. . The bonds will be sold through negotiation led by Roosevelt & Cross, Inc., on December 19, 2003. Bond proceeds will refund portions of the series 1991 I, 1992 B, and 1994 C bonds, for an estimated present value savings of $0.3 million. The bond bank issues bonds and uses the proceeds to make loans to local government borrowers throughout the state. Bonds are secured by loan repayments. A reserve for all parity debt, funded by bond proceeds at 100% of maximum annual debt service, is available to make up shortfalls that could potentially occur due to any missed loan repayments. As of June 30, 2003, reserves available for loan defaults equaled $19.6 million, or approximately 28% of bonds outstanding. In addition, each loan securing bonds issued under the state guarantee program is backed by a full faith and credit pledge of the state. An additional layer of support is a provision, albeit not a legal requirement, by the state to replenish re·plen·ish v. re·plen·ished, re·plen·ish·ing, re·plen·ish·es v.tr. 1. To fill or make complete again; add a new stock or supply to: replenish the larder. 2. the debt service reserve if it falls below its minimum specified level. The reserve make-up provision has never been utilized because no borrower has defaulted on a repayment since the bond bank began operations in 1977. The New Hampshire Municipal Bond Bank is an independent political subdivision of the state, established in 1977. Most of New Hampshire's eligible municipalities use the bond bank as their primary borrowing vehicle, because it offers local government borrowers the lowest cost of capital. The bond bank is administered by a five-member board consisting of the state treasurer Noun 1. state treasurer - the treasurer for a state government financial officer, treasurer - an officer charged with receiving and disbursing funds , who is a director ex officio [Latin, From office.] By virtue of the characteristics inherent in the holding of a particular office without the need of specific authorization or appointment. The phrase ex officio , and four directors appointed by the governor and council. A three person staff provides financial advice and technical assistance to borrowers, including assistance with the loan application process and project review for compliance with state law and federal tax regulations. The bond bank can issue bonds under two separate resolutions: (1) the general resolution and (2) the state guaranteed resolution. Bonds issued under both resolutions are general obligations of the bank. However, reserve funds can only be used to cure defaults under the resolution for which they were established. Both resolutions contain nearly identical 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. security, except that all municipal bonds purchased with the proceeds of bonds issued by the bank under the state guaranteed resolution are backed by the full faith and credit of the State of New Hampshire. In addition, bonds can only be issued under the state guarantee resolution for sewer SEWER. Properly a trench artificially made for the purpose of carrying water into the sea, river, or some other place of reception. Public sewers are, in general, made at the public expense. Crabb, R. P. Sec. 113. projects, landfill remediation, and for school districts. The New Hampshire constitution The New Hampshire Constitution is the primary governing document of the State of New Hampshire. The constitution became effective June 2, 1784, when it replaced the state's constitution of 1776. The constitution is divided into two parts: Bill of Rights and Form of Government. limits the guarantee of sewer, landfill, and school bonds issued by municipalities and purchased by the bank to $250 million, $30 million, and $95 million respectively. Aside from refunding bonds, no debt has been issued under the state guaranteed resolution since 1998. The state guaranteed portfolio is diversified, with loans outstanding to 66 borrowers from various cities, towns, school districts, and other local government units throughout the state. All loans are backed by the borrowers' general obligation pledge. The City of Portsmouth accounts for 15.4% of the total outstanding loan balance and the top ten borrowers comprise approximately 71.5% of the outstanding loan portfolio. Approximately 21.6% of the loans outstanding are to school districts, each of which receive an allocation of the state property tax and many of which also receive 'adequate education grants' from the state. Loan payments are due five days before the bond payment dates. The bond bank would charge borrowers 12% interest if a payment were late. Loans may not be refinanced, although the bond bank may issue refunding bonds and pass on interest savings to the local borrowers. Fitch analyzed an·a·lyze tr.v. an·a·lyzed, an·a·lyz·ing, an·a·lyz·es 1. To examine methodically by separating into parts and studying their interrelations. 2. Chemistry To make a chemical analysis of. 3. the default tolerance of the New Hampshire Bond Bank state guaranteed loan pool using a stress test it also applies to state revolving funds A revolving fund is a fund or account whose income remains available to finance its continuing operations without any fiscal year limitation. Within federal and state governments, law establishes revolving funds. and other municipal loan pools. The stress test considers loan quality, single risk concentration, reserve fund size, and debt service requirements. The bond bank's reserve fund is sufficient to pay bonds even if scheduled loan repayments fall short by as much as 30% for four consecutive years and no action is taken by the state to replenish the reserve fund. A loan repayment shortfall this severe is in excess of what Fitch would expect to occur in an 'AAA' stress scenario, given the quality of the bond bank's loan pool, which is 100% investment grade given the state guarantee. Fitch currently rates the state's general obligation debt 'AA.' |
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