NEW YORK LOCAL GOVERNMENT ASSISTANCE CORPORATION BONDS RATED 'A+' BY FITCH -- FITCH FINANCIAL WIRE --
NEW YORK LOCAL GOVERNMENT ASSISTANCE CORPORATION BONDS
RATED 'A+' BY FITCH -- FITCH FINANCIAL WIRE --
NEW YORK, Feb. 24 /PRNewswire/ -- The New York Local Government Assistance Corp.'s (LGAC) planned issue of $334.0 million Series 1992 A bonds is rated 'A+' by Fitch. The bonds, scheduled to be sold on Feb. 25, are a fifth installment of a total $4.7 billion authorization. The issue will include serials due 1993-2007, and term bonds in 2012, and 2021, all due April 1; call features are yet to be determined. Morgan Stanley & Co., Inc. 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 the total authorization bonds by over three times (x) 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 2.96x at an 8 percent interest rate and 2.79x 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 face financial pressure and this will be the fourth consecutive year that operating borrowing is carried forward. The budget for 1992-93 is currently under consideration.
/CONTACT: Claire G. Cohen of Fitch, 212-908-0552/ CO: New York Local Government Assistance Corp. ST: New York IN: SU: RTG SM -- NY067 -- 2008 02/24/92 15:24 EST