News Column

Fitch Rates AK Housing Finance Corp Housing Mortgage Revenue Bank Bonds 'AA+'; Outlook Stable

June 27, 2014

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has assigned an 'AA+' rating for the following Alaska Housing Finance Corporation (AHFC or Corporation) housing mortgage revenue bank bonds (2002 Indenture):

--Series 2009 A;

--Series 2009 B.

The 'AA+' rating is being assigned to the various AHFC bank bonds in connection with the upcoming substitutions of liquidity facilities for the above referenced series to B of T Mitsubishi (rated 'A/F1' with a Stable Outlook) from the internal liquidity of the AHFC. For more information regarding this substitution please see the Fitch press releases titled, 'Fitch to Revise S-T Rating to 'F1' on $80.88MM AK Housing Finance Corp Rev Bonds Ser 2009A', dated June 27, 2014.

Additionally, in conjunction with the assignment, Fitch affirms approximately $2.3 billion in outstanding AHFC general obligation (GO) debt at 'AA+'.

The Rating Outlook is Stable.

SECURITY

Upon certain events, various bonds can be converted to bank bonds and the accelerated principal and interest payments would become general obligations of the Corporation, secured by its full faith and credit pledge.

KEY RATING DRIVERS

STRONG ISSUER FINANCIAL POSITION: AHFC has consistently had one of the highest financial strength profiles relative to its peers which contributes to its 'AA+' GO rating. Despite net operating losses over the last few years, AHFC's sizable asset base allows the corporation to maintain its credit strength.

SUCCESSFUL MANAGEMENT PERSONNEL: AHFC has a strong, well-tenured management staff that continues to demonstrate the financial flexibility to address market challenges.

GEOGRAPHIC CONSTRAINTS: A high portion of AHFC's loan portfolio, which provides security for other general obligation backed bonds, lies in or around the city of Anchorage (50%). This amount of geographic concentration makes it difficult to increase the rating past the current level.

STRONG UNDERLYING ASSETS: The aggregate underlying mortgage portfolio has consistently performed adequately and has a current delinquency rate of only 2.1% (60+ days), which is lower than state and national averages.

RATING SENSITIVITIES

INCREASED STATE TRANSFERS: Under current legislative policies, transfers from AHFC to the state of Alaska are annually capped at the lesser of $103 million or 75% of change in net assets. Any changes to this policy that could increase AHFC's exposure to potentially higher transfers would put negative pressure on the corporation's GO rating.

CREDIT PROFILE

Based on a review of the standby bond purchase agreement supporting the substitution, the diversification of liquidity providers, and the strong cash levels residing within the programs, Fitch believes that AHFC's GO rating can support the additional risk associated with these potential bank bonds. In addition to assigning the ratings for these bank bonds, Fitch has also affirmed AHFC's GO rating and all outstanding Alaska Housing GO debt.

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

Applicable Criteria and Related Research

--'State Housing Finance Agencies: General Obligation Rating Criteria' (Feb. 27, 2014);

--'Revenue-Supported Rating Criteria' (June 16, 2014).

Applicable Criteria and Related Research:

State Housing Finance Agencies General Obligation Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=736598

Revenue-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=750012

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=836965

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

Charles Giordano

Senior Director

+1 212-908-0607

Fitch Ratings, Inc.

33 Whitehall Street

New York, NY 10004

or

Secondary Analyst

Ryan Pami

Analyst

+1 212-908-0803

or

Committee Chairperson

Mario Civico

Senior Director

+1 212-908-0796

or

Media Relations, New York

Elizabeth Fogerty, +1 212-908-0526

elizabeth.fogerty@fitchratings.com

Source: Fitch Ratings


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