News Column

Fitch Rates Texas Veterans 2008A GO Bank Bonds 'AAA'; Outlook Stable

August 11, 2014

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has assigned an 'AAA' rating to bank bonds corresponding to the following series of State of Texas general obligation (GO) veterans bonds:

--$32,230,000 State of Texas GO veterans bonds, series 2008A.

The rating is being assigned in conjunction with the extension of the standby bond purchase agreement between the Veterans' Land Board of the State of Texas and the Bank of Tokyo - Mitsubishi UFJ, Ltd. The veterans bonds are general obligations of the State of Texas.

Based on a review of the terms governing the bank bonds, it is Fitch's opinion that the incremental risk associated with bank bonds does not have a material impact on the long-term credit rating of the State of Texas.

The Rating Outlook is Stable.

SECURITY

General obligations to which the state pledges its full faith and credit.

KEY RATING DRIVERS

LOW DEBT: The state's debt burden remains low despite significant growth-related capital needs, especially for transportation. Amounts for debt service are constitutionally dedicated.

GROWTH-ORIENTED ECONOMY: The state's economy is large, diverse, and is growing rapidly relative to national averages. The state's energy industry remains a significant source of economic activity and is subject to volatility.

SIGNIFICANT RESERVE BALANCES: Financial operations are generally conservative. The state has built a sizable budget reserve, with a portion of natural resource receipts dedicated to funding it.

SALES TAX DEPENDENCE: Finances are dependent on consumption-based (primarily sales) taxes, and volatile energy taxes are also important.

GROWTH-RELATED SPENDING PRESSURES: Longer term fiscal pressures stem from having to adequately fund the state's rapid growth. This includes expanded transportation needs, school funding, and water needs.

RATING SENSITIVITIES

ECONOMIC GROWTH AND HIGH RESERVES: The state's GO rating and Stable Rating Outlook assume the maintenance of high reserve balances and continued economic growth. The rating could be pressured in the event of severe revenue weakness, including stemming from cyclicality in the state's large energy sector, or unwillingness to address potential fiscal challenges in an effective and timely manner.

For additional information on the State of Texas GO credit, see Fitch's press release 'Fitch Affirms Texas GO Rating at 'AAA'; Outlook Stable', dated Aug. 8, 2014 and available at 'www.fitchratings.com'.

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 IHS Global Insight.

Applicable Criteria and Related Research:

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

--'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

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=848894

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

Douglas Offerman

Senior Director

+1-212-908-0889

Fitch Ratings

33 Whitehall Street

New York, NY 10004

or

Secondary Analyst

Marcy Block

Senior Director

+1-212-908-0239

or

Committee Chairperson

Karen Krop

Senior Director

+1-212-908-0661

or

Media Relations

Elizabeth Fogerty, New York, +1-212-908-0526

elizabeth.fogerty@fitchratings.com


Source: Fitch Ratings


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