Fitch Rates Idaho Housing's $35MM 2007 Series A Bonds.
--$17.5 million class I variable-rate bonds at 'AAA/F1+';
--$9.5 million class I fixed-rate bonds 'AAA';
--$1 million class II bonds 'AA';
--$7.0 million class III bonds 'A+'.
The 2007 series A bonds are the fourth offering issued under a series trust indenture dated Sept. 1, 2006. The bonds are expected to close on March 1, 2007, through a syndicate led by Lehman Brothers.
The $35 million 2007 series A single family mortgage bonds are being issued under a supplemental indenture that pledges mortgage revenues, investment earnings, reserves and other trust funds to secure the bonds. Additionally, the class III bonds are secured by the association's general obligation (GO) pledge for payments of scheduled interest and principal at final maturity.
Bond proceeds will provide about $32.9 million in available lendable funds to continue the association's single family, first-time homebuyer mortgage purchase program. The program permits loans to be insured by the Federal Housing Administration (FHA), guaranteed by the Department of Veterans Affairs (VA) or the Rural Housing and Community Development Service (RHCD), or insured by a qualified private mortgage insurance provider. The supplemental indenture requires that at least 40% of all loans be fully insured by the FHA, while privately insured loans are limited to 50% of the portfolio and RHCD loans to $3 million.
The 'AAA' and 'AA' ratings on the bonds reflect the credit quality of the trust estate's collateral, the adequacy of projected revenues to pay debt service, the credit enhancement provided by the 28% debt subordination at time of issuance underlying the class I bonds, and the 24% debt subordination underlying the class II bonds. In addition, the series A class I and II bonds have minimum asset requirements of 119% and 112%, respectively, directing revenues to be used to call bonds of that class prior to paying debt service of the next junior class. Risks include: the 21-year maturity of the class III bonds, after which time the class II bonds may be exposed to potential program losses beyond available excess funds; the unseasoned nature of the portfolio of loans; and the possible shifts in the portfolio insurance requirements, allowing for a greater percentage of conventionally-insured mortgages with a potential for higher losses than FHA-insured loans.
While the class III bonds are secured by the assets and revenues of the trust indenture, their rating reflects the 'A+' rating assigned to the creditworthiness of the association's GO pledge. The GO rating is based on favorable overall financial and portfolio performances, adequate levels of liquidity and excess reserves, a moderate debt-to-equity ratio when compared with other state housing finance agencies, and management's expertise in carrying out the association's public purpose mandate while protecting its long-term credit quality.
The short-term 'F1+' rating on the class I variable-rate demand bonds is based on the liquidity support provided by a standby bond purchase agreement (SBPA) issued by Lloyds TSB Bank plc, acting through its New York Branch. The SBPA provides for payment of the purchase price of tendered bonds and is sized to cover the principal portion of the purchase price and 186 days of interest at a rate of 12%, based on a 360-day year. The short-term rating on the bonds will expire on March 1, 2010, the stated expiration date of the SBPA, unless such date is extended or upon any earlier expiration or termination of the SBPA.
The class I variable-rate bonds will be issued with an initial interest rate, extending to March 6, 2007. Thereafter, such bonds will be in a weekly interest rate mode but may be converted to a daily, monthly, quarterly, auction, semiannual or fixed interest rate mode. During the daily and weekly modes, holders have the option to tender their bonds for purchase on any business day with prior notice. During the other variable interest rate modes, bondholders have the option to tender bonds on the effective date of a new interest rate, following specified advance notice. These bonds are also subject to mandatory tender upon conversion of the interest rate mode, except when converting between daily and weekly interest rate modes; and on the fifth business day prior to the expiration of the SBPA. Optional and mandatory redemption provisions also apply to the bonds, pursuant to the terms of the documents.
Not including the 2007 Series A issuance, 50% of the bonds outstanding under the indenture are in the variable-rate mode. Of the variable-rate bonds under the indenture, 93% are swapped to a synthetic fixed-rate with one counterparty, Lehman Brothers Derivatives Products, Inc. (LBDP), a subsidiary of Lehman Brothers Inc. LBDP rated 'AAA' by Fitch Ratings. The association has also entered into an interest rate swap agreement relating to $15.2 million of 2007 Series A class I variable-rate bonds with LBDP
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|Date:||Feb 22, 2007|
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