Fitch rates Vermont Muni Bond Bank’s $9.5 million Gen Res program bonds ‘AA’; outlook stable

first_imgFitch Ratings assigns an ‘AA’ rating to the following 2011 Vermont Municipal Bond Bank bonds, issued under the 1988 General Resolution:–$9,500,000 (federally taxable qualified school construction bonds) 2011 series 1.The bonds are expected to sell via negotiation on March 9, 2011. Bond proceeds will be loaned to two local school districts for capital improvements.In addition, Fitch affirms $516,930,000 in outstanding general resolution bonds at ‘AA’.The Rating Outlook is Stable.RATING RATIONALE:–The program’s pledged reserves and loan repayments, excluding federal subsidies, allow the bonds to withstand borrower defaults of up to 17.22% for four years without causing an interruption in bond payments. This is consistent with Fitch’s criteria for assigning an ‘AA’ rating given the loan pool’s borrowers’ credit quality, size and diversification.–The program, which consists of more than 260 borrowers, is diverse with low single-borrower concentration.–The program’s loan security is strong, with approximately 97% of all loans backed by a general obligation pledge and additional protection from borrower defaults through a state-aid intercept mechanism.KEY RATING DRIVERS:–The bond bank’s ability to balance future leveraging with program resources to maintain borrower default tolerance levels that pass Fitch’s ‘AA’ stress test scenarios is important to maintain the rating.–Credit quality of the bonds is also linked to repayment performance on the program’s loan portfolio.SECURITY:Program bonds are secured by borrower loan repayments and debt service reserve funds. A state moral obligation on the reserve fund and a state-aid intercept provision for borrowers provide additional credit enhancement.CREDIT SUMMARY:Established in 1970, The Vermont Municipal Bond Bank (VMBB) is a quasi-state agency. It is administered by a five-member board consisting of four gubernatorial appointees and the state treasurer. The bond bank issues bonds and uses the proceeds to make loans to local government borrowers throughout the state. Virtually all of Vermont’s eligible municipalities use the bond bank as their primary borrowing vehicle because it offers local government borrowers the lowest cost of capital.The loan pool consists of more than 260 borrowers from cities, towns, counties, school districts and other local governments throughout the state. Approximately 97% of all loans are backed by a general obligation pledge; the remaining are backed by utility pledges from five borrowers. About 52% of the loans are to school districts, which are further backed by an intercept mechanism that includes any state funds payable to borrowers. State aid is reportedly over 90% of school district debt service. The loan portfolio’s largest borrower, Springfield School District, comprises only 5% of the portfolio. The top 10 borrowers account for 32% of the total outstanding loan balance.Fitch analyzed the default tolerance of the VMBB loan pool using a stress test it also applies to state revolving funds and other municipal loan pools. The stress test considers loan quality, single risk concentration, reserve fund size, and debt service requirements. The program’s pledged reserves and loan repayments, excluding the federal subsidies, allow the bonds to withstand borrower defaults of up to 17.2% for four years without causing an interruption in bond payments. This is consistent with Fitch’s criteria for assigning an ‘AA’ rating given the loan pool’s borrowers’ credit quality, size and diversification (17.09%).With the 2011 -1 issue, VMBB offers its fourth series of federally subsidized bonds, Qualified School Construction and Recovery Zone Economic Development, which provide 0% and 45% in interest rate subsidies, respectively, offsetting the pool participants’ cost of borrowing. However, as the pool continues to leverage these issues, the program’s cash flow margins become tighter under Fitch’s stressed scenarios, which assume that no scheduled federal debt service subsidies are received. Per its report ‘Build America Bonds Broaden Municipal Market – Credit Considerations’ dated April 27, 2010, Fitch assesses the ability of the issuer to pay full interest on the BABs, regardless of the subsidy. While Fitch believes there could be offsets to some annual subsidy payments, it believes that VMBB management would take action to address the reasons for the offset and avoid multiple years with no subsidy, including the use of certain optional redemption provisions for its federally subsidized bonds. Nevertheless, the bond bank’s ability to balance future leveraging with program resources to maintain borrower default tolerance levels that pass Fitch’s ‘AA’ stress test scenarios is important to maintain the rating.The program’s debt service reserve fund, which is sized at the least of maximum annual debt service, 125% average annual debt service, or 10% of bond proceeds, is funded with bond proceeds and invested in U.S. treasury and agency securities. Pledged reserves, currently total $49.9 million, or 9.7% of bonds outstanding. In addition, the bank maintains approximately $10.9 million in unrestricted general fund reserves, which are not pledged to bondholders but may be used if a deficiency occurs. The bonds are also supported by a state moral obligation to replenish the debt service reserve fund if it falls below its minimum specified level. Neither the intercept nor the moral obligation has ever been utilized, because no borrower has defaulted on a loan repayment since the bond bank began operations in 1970.Loan payments are due 15 days before the bond payment dates. Under Vermont’s state intercept provision, if a borrower fails to make its scheduled loan repayment, the bond bank will certify the failure of that payment with the state treasurer. The state treasurer would then pay the defaulted loan amount to the bank’s trustee from amounts appropriated and payable by the state to the defaulted borrower, if available. If sufficient state aid is unavailable, it will be paid from subsequent interceptable state aid payments, with bond bank reserves covering the temporary shortfall. To date, this mechanism has not been tested as there have not been any loan defaults in the history of the program.Additional information is available at is external).Applicable Criteria and Related Research:–‘Revenue-Supported Rating Criteria’ (Oct. 8, 2010);–‘State Revolving Fund and Municipal Loan Pool Rating Guidelines’ (April 28, 2008);–‘Build America Bonds Broaden Municipal Market – Credit Considerations’ (April 27, 2010).For information on Build America Bonds, visit is external).Applicable Criteria and Related Research:Revenue-Supported Rating Criteria…(link is external)State Revolving Fund and Municipal Loan Pool Rating Guidelines…(link is external)Build America Bonds Broaden Municipal Market — Credit Considerations…(link is external)  CHICAGO–(BUSINESS WIRE)–last_img read more

PSA discusses gun control in America on Wednesday

first_imgFollowing a shooting at a community college in Oregon three weeks ago where an armed man killed 10 people and injured seven others before committing suicide, students gathered Wednesday afternoon in the Rosen Room of the Ronald Tutor Campus Center to discuss the issue of gun control in America.The event was hosted by the Jesse M. Unruh Institute of Politics and the Political Student Assembly as part of the California Politics Roundtable Discussion — a joint effort between the two organizations.The discussion was moderated by Dan Schnur, director of the Unruh Institute; Sonali Seth, director of political content for the PSA and editorial director of the Daily Trojan; and Jonathan Gunn, social media marketing director for PSA. It featured Christina Bellantoni, assistant managing editor for politics at the Los Angeles Times and Alan Zarembo, projects and investigative reporter  for the L.A. Times.Bellantoni responded to question asking if shootings similar to the one in Oregon have an affect on the political landscape. She said that in 2011, the year Republicans took office,  Gabrielle Giffords, a Democrat from Arizona, was shot at an event in her home district.“A year later there were the shootings in Newtown. And I said, ‘This is it, people watched children get slaughtered at a school, there will be an instance where you see something happening,” she said. “If those two incidents were not going to change the political landscape at a time when the nation was struck by tragedy, then it was not going to happen.”Since the Newtown shootings, many have observed the lack of legislation on the subject of gun control because of the divide between Democrats and Republicans on the issue.“With the red-blue division of states, gun control is the kind of issue where these political and cultural divides play out in very real terms,” Schnur said.The discussion also touched on the role of mental health in mass shootings.“The problem with using the mental health argument is that there are a lot of people who are mentally disturbed in our country. Very, very few are involved in shootings,” Zarembo said. “As a strategy for bringing down shootings, addressing mental health is probably not a good idea as there much clearer things that could be done.”Leesa Danzek, a senior majoring in political science, asked about current legislation controlling the sale of guns to criminals.“I am not an expert on what legislation is out there,” Bellantoni said. “But I will tell you that what they’re looking at in California is having ammunition be registered and doing more background checks.”Seth noted the discrepancy between the perception of how much crime has risen over the past couple of decades versus how much it has actually risen.“Do you think there are any political implications of this perception that crime is rising while it may not be?” she asked.Zarembo responded by saying the perception might come from politicians preparing for negative outcomes.“Well, crime is not rising, overall,” Zarembo said. “I think that fear is a very powerful force in politics, and if you listen to our politicians, my impression is that we’re always on the edge of catastrophe and perhaps the media could do a better job of dialing us back to reality.”last_img read more