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TMCNet:  Fitch Affirms Oregon's School Bond Guaranty Program at 'AA+'; Outlook Stable

[July 22, 2014]

Fitch Affirms Oregon's School Bond Guaranty Program at 'AA+'; Outlook Stable

NEW YORK --(Business Wire)--

Fitch Ratings has affirmed the outstanding 'AA+' rating on the Oregon School Bond Guaranty Program. The Rating Outlook is Stable.

SECURITY

State guarantee - full faith and credit obligation of the state on par with the state's general obligation (GO) bonds.

KEY RATING DRIVERS

FULL FAITH AND CREDIT PLEDGE: The state's guaranty pledge on qualifying school debt is a full faith and credit obligation, on par with that of its own GO bonds. As a result, bonds qualifying for the program receive an 'AA+' rating, equivalent to the state's GO bonds.

SOUND PROGRAM MECHANICS: Program mechanics allow sufficient time for state funds to be made available to pay debt service by the debt service payment date.

ABILITY TO ISSUE STATE GO BONDS: If insufficient funds are on hand, the state may issue GO bonds to meet its obligations under the guaranty.

RATING SENSITIVITIES

The rating is sensitive to movements in the 'AA+' GO rating of the state to which it is linked.

CREDIT PROFILE

The 'AA+' program rating reflects the State of Oregon's (GO bonds rated 'AA+') pledge of its full faith and credit and taxing power to secure qualified bonds of its school districts. The Oregon School Bond Guaranty Act (ORS 328.321 to 328.356) became effective in 1998 following the approval of a constitutional amendment permitting the guaranty of school district GO bonds by the state. At present, approximately $3.7 billion across 335 series of bonds are outstanding under the program. Oregon's constitution limits the state's ability to issue bonds for this purpose to 0.5% of the true cash value of all taxable property in the state (current limit would be approximately $2.17 billion).

A set of administrative rules govern procedures whereby school districts' bonds will be qualified for the guaranty. School districts must transfer funds to paying agents 15 days prior to the payment date, and if a school district is unable to do so, the state treasurer must be notified. If sufficient funds are not received 10 days prior to a debt service payment date, the paying agent must notify the state treasurer, who must transfer sufficient funds to cover the district's guaranteed obligation on or before a scheduled payment date. If sufficient moneys are not available for that purpose, the state treasurer may either obtain a loan from any state fund to make the required payment, borrow money, issue state bonds, or borrow moneys from the General Fund or any other legally available fund available for this purpose.

A request for qualiication prompts a review of the applying district's financial condition, and must be submitted no less than thirty days before a bond sale. School districts drawing upon the guaranty remain liable for repaying the state, and the state may intercept future payments to the district for such purpose. Additionally, the State Treasurer may charge interest or impose fines, or take other legal action as necessary on school districts requiring use of the program. As of April 2014, the State Treasurer now requires a school district to acquire bond insurance or other credit enhancement, or pledge additional collateral, when a district's total state-guaranteed debt service exceeds 80% of its state aid on an annual basis.


This rating can be assigned to GO bonds of any Oregon school district that has been issued a certificate of qualification by the state treasurer.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Tax-Supported Rating Criteria' (Aug. 14, 2012);

--'State Credit Enhancement Program Criteria' (April 18. 2013);

--'U.S. State Government Tax-Supported Rating Criteria' (Aug. 14, 2012).

Applicable Criteria and Related Research:

Tax-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686015

U.S. State Government Tax-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686033

Rating Guidelines for State Credit Enhancement Programs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=704880

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=840946

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 (News - Alert) 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. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.


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