The bonds are scheduled to price via negotiation the week of
In addition, Fitch has affirmed the following ratings:
The Rating Outlook is Stable.
The senior lien 2010 MFI revenue bonds are secured by a senior lien pledge on borrower loan repayments and, on a subordinated basis, excess available reserve account release payments from the 1991 MFI program bonds and the
KEY RATING DRIVERS
SOLID FINANCIAL STRUCTURE: Fitch's cash flow modeling demonstrates that the program can continue to pay bond debt service even with loan defaults in excess of Fitch's 'AAA' liability default hurdle, as produced using Fitch's Portfolio Stress Calculator (PSC).
HIGHLY-RATED BORROWER POOL: Approximately 90% of the borrowers in the 2010 MFI pool have investment-grade ratings. Most loans are secured by borrowers' general obligation or utility revenue pledges.
MODERATE POOL DIVERSITY: The loan portfolio has average borrower concentration, with the top 10 borrowers representing approximately 53% of the loan pool.
STRONG PROGRAM MANAGEMENT: EFC manages the largest SRF program in the nation. As evidence of effective management, there have been no pledged loan defaults in any of the SRF programs since the inception of the 1991 MFI program.
REDUCTION IN MODELED STRESS CUSHION: Significant deterioration in aggregate borrower credit quality, increased pool concentration, or increased leveraging resulting in the program's inability to pass Fitch's 'AAA' liability default hurdle would put downward pressure on the rating. The Stable Rating Outlook reflects Fitch's view that these events are not likely to occur.
The EFC provides financial assistance for eligible projects within the state under three separate SRF programs: the 2010 MFI program, the closed 1991 MFI program (rated 'AAA' by Fitch), and the NYCMWFA financing program (senior and subordinate bonds rated 'AAA'/'AA+' by Fitch).
The 2010 MFI program is structured using cash flow model methodology, wherein pledged loan repayments made in excess of bond debt service protect bondholders from risk of payment deficiencies.
FINANCIAL STRUCTURE EXHIBITS SOLID DEFAULT TOLERANCE
As a measure of financial strength, Fitch calculates each SRF program's asset strength ratio (PASR), which includes total scheduled pledged loan repayments, reserves (if any) and account earnings divided by total scheduled bond debt service. The 2010 MFI's PASR is solid at approximately 1.6x, and in line with Fitch's 'AAA' median. Because of this coverage, cash flow modeling demonstrates that the program can continue to pay bond debt service even with hypothetical loan defaults of 87% in the first four years of the program's life and 100% over the middle and last four years.
The default tolerance produced by the PSC is in excess of Fitch's 'AAA' liability stress hurdle of 37%. The liability stress hurdle is calculated based on overall pool credit quality as measured by the rating of underlying borrowers, size, loan term, and concentration. The PASR has decreased from 1.9x to 1.6x since Fitch's last review, which is indicative of slightly more program leverage.
Annual debt service coverage, which excludes amounts released to the 2010 MFI program from the other SRF programs, is projected to be a minimum of 1.5x.
HIGH-QUALITY LOAN POOL WITH MODERATE CONCENTRATION
The pool program consists of 283 borrowers, the top 10 of which comprise approximately 53% of outstanding loan obligations.
Fitch estimates that approximately 90% of program participants exhibit investment-grade credit quality, with the large majority rated 'A' or higher. In aggregate, pool credit quality is in line with similar municipal pools as reflected by a 'AAA' liability stress of 37% (lower liability stresses correlate to stronger credit quality), which nearly matches Fitch's median. Approximately 87% of loan repayments are secured by GO pledges, 11% secured by utility net revenues and the remaining portion secured by other security types; 2010 MFI pool composition remains fairly stable.
ENHANCEMENT PROVIDED PRIMARILY BY OVERCOLLATERALIZATION
The 2010 MFI bonds are protected from losses primarily by surplus loan repayments made in excess of bond debt service (overcollateralization). In addition to overcollateralization, the 2010 MFI bonds are supported on a subordinate-lien basis by debt service reserve releases (deallocations) from the 1991 MFI and NYCMWFA programs. Finally, if the previously mentioned support methods are insufficient to cover 2010 MFI bond payment deficiencies, non-pledged amounts in the clean water and drinking water SRF equity accounts will be used. Because of the subordinate-lien nature of the deallocations and due to uncertainty that such pledges will be available throughout the 2010 MFI program's expected life, such amounts were excluded in Fitch's cash flow model analysis.
CROSS COLLATERALIZATION, INTERCEPTABLE AID PROVIDE ADDITIONAL PROTECTION
The clean water SRF (CWSRF) and drinking water SRFs (DWSRFs) are accounted for separately. However, the funds are cross-collateralized in that the 2010 MFI allows available resources in the CWSRF and DWSRF to be available for lending to either SRF. This cross-collateralization feature links the SRF programs and thus allows Fitch to combine the funds in its modeling analysis.
Underlying loans are subject to a state intercept mechanism in the event of delinquent repayments. However, Fitch conservatively did not consider this mechanism in its analysis, as evidence of each borrower's interceptable aid was not provided.
STRONG PROGRAM MANAGEMENT AND UNDERWRITING
The EFC was created by the EFC Act in 1970 as a public benefit corporation of the state. EFC manages the SRF programs on behalf of the federal grant recipients which include the
Additional information is available at 'www.fitchratings.com'.
--'State Revolving Fund and Leveraged Municipal Loan Pool Criteria' (
--'State Revolving Fund and
--'Revenue-Supported Rating Criteria' (
Revenue-Supported Rating Criteria
Source: Fitch Ratings
Most Popular Stories
- Shia LaBeouf Plea Deal, Alcoholism Treatment
- Stop-Start Engines Save Gas, Reduce Emissions
- Ohio State Band Chief Fired After Probe
- Hispanic Leader Goes the Extra Mile
- Ukraine Says Russians Firing Across the Border
- Ford Q2 Net Profit up 6 Percent
- Jennifer Lopez, Pitbull to Perform at Fashion Rocks
- Ricky Martin Joins 'The Voice ... Mexico'
- U.S. Weighs Refugee Status for Immigrant Kids
- Morgan Stanley Ponies Up $275 Million to Settle SEC Charges