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NEW YORK LOCAL GOVERNMENT ASSISTANCE CORP. BONDS RATED 'A+' BY FITCH -- FITCH FINANCIAL WIRE --

NEW YORK LOCAL GOVERNMENT ASSISTANCE CORP. BONDS RATED 'A+' BY FITCH
 -- FITCH FINANCIAL WIRE --
 NEW YORK, Dec. 9 /PRNewswire/ -- The New York Local Government Assistance Corp.'s (LGAC) planned issue of $450.1 million series 1991 D bonds is rated 'A+' by Fitch. The bonds, scheduled to be sold on Dec. 10, are a fourth installment of a total $4.7 billion authorization. The issue will include serials due 1993-2006, and term bonds in 2011, 2019, and 2021 all due April 1, and callable beginning April 1, 2002, at 102 percent. Lehman Brothers is lead underwriter. The credit trend is considered uncertain, the same evaluation as for the state of New York.
 LGAC was created as a means of financing $4.7 billion of the state's accrued general fund deficit. Proceeds will be used to make local aid payments, which normally are met from proceeds of the state's annual "spring borrowing". As LGAC incurs debt, an equal amount must be reduced from the spring borrowing. There is an overall limit, by covenant, of $4.7 billion for the two combined, unless an emergency is declared.
 LGAC bonds are general obligations of the corporation, payable from the deposit of the yield of 1 percent of the state's 4 percent sales and use tax. Monies in excess of LGAC's needs flow to the general fund. While payments from the sales and use tax require state appropriation, this risk is hedged. Unless an appropriation is in place, the 1 percent yield is retained in a special fund, available to neither LGAC nor the state. The 1 percent tax is estimated to yield around $1.4 billion in fiscal 1992, which would cover debt service on $4.7 billion bonds by over three times at an assumed interest rate of 8 percent. Based on actual collections in fiscal 1991 of $1.34 billion on a net basis, debt service coverage would be 2.93 times at an 8 percent interest rate and 2.74 times at a 9 percent interest rate.
 Security strengths include the broad base of the designated tax, the generous level of coverage and the structured protections against non- appropriation, and concurrent excessive operating borrowing. LGAC is, however, an instrument of the state of New York, an integral part of its ongoing fiscal reform. The state continues to attempt to achieve financial stability but a budget gap equal to 3 percent of revenues is now expected for 1991-92, implying a larger problem next year. Expenditure cuts have been recommended but no action has yet been taken.
 -0- 12/9/91
 /CONTACT: Claire G. Cohen of Fitch, 212-908-0552/ CO: New York Local Government Assistance Corp. ST: New York IN: FIN SU: RTG SM -- NY080 -- 0736 12/09/91 17:30 EST
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Publication:PR Newswire
Date:Dec 9, 1991
Words:459
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