Printer Friendly

Fitch Rates Wisconsin's $800MM Operating Notes 'F1+'.

NEW YORK -- Fitch Ratings assigns an 'F1+' rating to the following State of Wisconsin (the state) notes:

--$800 million operating notes of 2010.

The notes are expected to sell via competitive sale on June 15, 2010.

RATING RATIONALE:

--Although the notes are general fund contractual obligations rather than general obligations of the state, all general fund revenues after payment of debt service on general obligations are pledged.

--Scheduled state impoundments provide for full debt service by May 31, 2011, 16 days prior to the note payment date. A monthly revenue test would trigger early impoundment if necessary.

--Borrowable funds in excess of note principal are available.

--A structural budget imbalance has persisted, resulting in a reliance on nonrecurring items and shifting general fund expenses to other funds; the imbalance has been exacerbated by the current downturn.

--Despite reserve funding provisions, the state's financial reserves were minimally funded in recent years and have been depleted as part of budget solutions in the current downturn.

--The state has a strong, centralized governmental structure with line-item executive veto power.

KEY RATING DRIVERS:

--Adequate coverage of impoundments by cash and borrowable resources.

SECURITY:

Payable from revenues pledged from the general fund to the operating note redemption fund (i.e., all general fund revenues net of debt service on general obligations). The operating notes are not general obligations of the state.

CREDIT SUMMARY:

The 'F1+' rating reflects strong legal provisions for these general fund contractual obligations, including impoundment provisions and monthly revenue tests. Although the state expects to end fiscal year 2011 with a cash deficit, the availability of interfund borrowing in an amount greater than note principal provides a cushion. Projected coverage of the notes as of June 30, 2011 including borrowable resources is 1.8 times (x).

The notes are payable from revenues pledged from the general fund to the operating note redemption fund. They are not general obligations of the state; however, all general fund revenues net of debt service on general obligations are pledged to support the notes. The notes mature on June 15, 2011, but the note repayment account is to be fully funded 16 days prior to note maturity, further enhancing protection. Impoundments are made to bring the note repayment account to a level equal to 25% of note principal and interest on Feb. 28, 2011, 50% on March 31, 2011, 75% on April 29, 2011 and 100% with the final impoundment on May 31, 2011. The May closing cash balance after payment of the notes is estimated at $314 million. Cash flow forecasts are reviewed monthly and provisions are made for the set-aside of general revenues along with expenditure deferrals if funds are insufficient for impoundments.

State statute permits a negative ending cash balance. On a cash flow basis, fiscal 2011 is projected to close with a cash deficit of $476 million, down from fiscal 2010 projected ending balance of $207 million. Cash flow forecasts for fiscal year 2010 initially projected a deficit of $102 million. Borrowable resources in June 2011 are expected to total nearly $1.2 billion, excluding balances in the local government investment pool. The notes are a low 2.8% of projected fiscal 2011 revenues and provide cash flow for the second year of the 2009-2011 biennium, which begins on July 1, 2010.

Fitch rates the state's general obligation bonds 'AA', Outlook Stable. For more information on the state, please see Fitch's rating action commentary dated March 16, 2010.

Applicable criteria available on Fitch's website at www.fitchratings.com includes:

--'Tax-Supported Rating Criteria', dated Dec. 21, 2009.

--'U.S. State Government Tax-Supported Rating Criteria', dated Dec. 28, 2009.

--'Rating Municipal Short-Term Debt', dated Oct. 18, 2007.

Additional information is available at www.fitchratings.com.

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE '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 ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.
COPYRIGHT 2010 Business Wire
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2010 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Publication:Business Wire
Geographic Code:1U2NY
Date:Jun 10, 2010
Words:709
Previous Article:Mace Security International Announces Car Wash Sales.
Next Article:WINGS Appoints Leading Medical Technology Entrepreneurs and Angel Investors to Chair its Board of Directors.

Terms of use | Privacy policy | Copyright © 2018 Farlex, Inc. | Feedback | For webmasters