News Column

Fitch Upgrades Syracuse IDA, NY's Rev Bonds to 'AA'; Outlook Stable

June 24, 2014

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings upgrades the following Syracuse Industrial Development Agency (IDA), NY ratings to 'AA' from 'AA-':

--Approximately $111 million school facility revenue bonds (Syracuse city school district project), series 2008A, 2010, 2011A, and 2011B.

The Rating Outlook is Stable.

SECURITY

The bonds are secured solely by state aid revenues annually appropriated to the Syracuse City School District (the district) by the state of New York (the state) and remitted to the district from the period Dec. 1 through March 31 (the collection period).

The funds are subject to appropriation by the district as installment purchase payments. The district's budget is subject to approval by the city of Syracuse (the city). Installment purchase payments are not subject to offset, counterclaim, or reduction.

In the event that the district fails to appropriate state aid sufficient to cover debt service payments by Nov. 10, state aid sufficient to cover the subsequent principal and interest payments will be intercepted and forwarded to the trustee. As intercepted aid is not subject to appropriation by the district, this provision effectively removes the risk to bondholders of no-appropriation by the district.

The 2008 bonds are additionally secured by a surety-funded debt service reserve funded to the IRS standard; there is no debt service reserve securing the 2010 or 2011 bonds.

KEY RATING DRIVERS

UPGRADE BASED ON NY STATE: The upgrade to 'AA' with a Stable Outlook reflects Fitch's upgrade of and Outlook on the state's general obligation (GO) and related debt.

RATING BASED ON STATE INTERCEPT: The one notch distinction between the IDA's bond rating and Fitch's 'AA+' GO bond rating on the state of New York reflects the security provided by the state aid intercept. Bondholders benefit from remittance of state aid to a depository fund from which debt service is set aside before flowing to the district and, in the event of a failure to appropriate, a state aid intercept structure that provides for pre-default payment.

STRONG COVERAGE: Interceptable state aid provides strong coverage of maximum annual debt service (MADS). Coverage from state aid may decline in the coming years due to the district's extensive capital and borrowing plans and charter school competition and declining enrollment. However, Fitch expects coverage levels to remain strong.

RATING SENSITIVITIES

CHANGE IN NEW YORK'S GO RATING: This rating is sensitive to a change in the state's GO rating or Outlook, to which these bonds are linked.

MATERIAL WEAKENING IN COVERAGE LEVELS: The rating assumes continued strong coverage of debt service by interceptable state aid.

CREDIT PROFILE

For more information on the state's GO rating, see Fitch's press release 'Fitch Upgrades New York State GO and Related Bonds to 'AA+' Outlook Stable' dated June 20, 2014, available on the Fitch web site at 'www.fitchratings.com'.

For more information on the Syracuse IDA school facility revenue bond rating, see Fitch's press release 'Fitch Affirms Syracuse IDA NY Rev Bonds at 'AA-'; Outlook Positive' dated June 3, 2014.

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

In addition to the sources of information identified in Fitch's Tax-Supported Rating Criteria, this action was additionally informed by information from Creditscope, University Financial Associates, S&P/Case-Shiller Home Price Index, IHS Global Insight, National Association of Realtors.

Applicable Criteria and Related Research:

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

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

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

--'Fitch Upgrades New York State GO and Related Bonds to 'AA+' Outlook Stable' (June 20, 2014);

--'Fitch Affirms Syracuse IDA NY Rev Bonds at 'AA-'; Outlook Positive' (June 3, 2014);

--'Rating Guidelines for State Credit Enhancement Programs', (April 18, 2013).

Applicable Criteria and Related Research:

Tax-Supported Rating Criteria

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

U.S. Local Government Tax-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=685314

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=836314

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 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.



Fitch Ratings

Primary Analyst

Stephen Friday

Associate Director

+1-212-908-0384

Fitch Ratings, Inc.

33 Whitehall Street

New York, NY 10004

or

Secondary Analyst

Eric Friedman

Director

+1-212-908-9181

or

Tertiary Analyst (State of New York)

Douglas Offerman

Senior Director

+1-212-908-0889

or

Committee Chairperson

Jessalynn Moro

Managing Director

+1-212-908-0608

or

Media Relations

Alyssa Castelli, +1-212-908-0540

alyssa.castelli@fitchratings.com


Source: Fitch Ratings


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