Fitch Rates Maine Municipal Bond Bank's $19MM Revs 'AAA'; Outlook Stable

CHICAGO--(Business Wire)--
Fitch Ratings assigns 'AAA' ratings to the following Maine Municipal Bond Bank's
general resolution bonds:

--$6.4 million 2010 series A tax-exempt bonds;

--$13.3 million 2010 series B taxable bonds (recovery zone economic development
bonds).

In addition, Fitch affirms the following 'AAA' ratings:

--$1.1 billion in outstanding general resolution bonds (general tax-exempt fund
group).

The Rating Outlook for all the bonds is Stable.

The 2010A and 2010B bonds are expected to sell via negotiation during the week
of April 26, 2010. Proceeds will be used to issue local bonds to 11 local
governments for capital projects and to fund the reserve for the 2010A bonds.

RATING RATIONALE:

--The program's reserves, funded at 100% of maximum annual debt service, allow
the bonds to withstand loan defaults in excess of what Fitch would expect in an
'AAA' scenario given the size, quality and diversity of the loan portfolio.

--The program's underlying loan credit quality is strong, and the ability of the
program to intercept state aid payments of potential delinquent borrowers
further increases borrower credit quality. Fitch estimates that at least 77% of
outstanding loan principal exhibits investment-grade characteristics.

--The loan portfolio is large and well diversified, with low single borrower
concentration.

--The program's loan security is strong as approximately 91% of outstanding loan
principal is backed by GO pledges. In addition, no obligor has defaulted in the
bond bank's 30-year history.

--Maine's state law provides for but does not legally require the state to
replenish the reserve fund if it falls below its minimum specified level.

--The program maintains prudent investment practices.

KEY RATING DRIVERS:

--Credit quality of the bonds is linked to repayment performance on the
program's loan portfolio and credit quality of investments in the reserve fund.

--Sustained state financial commitment to school funding and strong reserves are
important to preserving the 'AAA' credit rating.

SECURITY:

The bonds are secured by repayments of municipal bonds issued by local
government units and reserves funds.

CREDIT SUMMARY:

The bond bank's general tax-exempt fund group, which first issued bonds under a
general resolution adopted in 1973 and under which the 2010 series A are being
sold, issues tax-exempt bonds that fund loan obligations to local government
units. In addition, the 2010 series B taxable recovery zone economic development
bonds are also being issued under the general resolution. The bonds provide for
a 45% cash interest rate subsidy from the federal government to be received by
the trustee. The bond bank does not plan to reduce related loan repayments
except to the extent that the cash subsidy payment is actually received by the
trustee for deposit under the resolution on a timely basis.

The bonds are primarily secured by repayments of municipal bonds issued by 283
local government units. Approximately 63% of the outstanding municipal bonds are
backed by general obligation pledges of school districts, 27% by other local
government general obligations, 9% by revenue pledges, and approximately 1% by
hospital revenues. The borrower pool is naturally diversified, with the largest
obligor, the City of Brewer, accounting for approximately 4% of the total
outstanding municipal bonds, and the top 10 borrowers accounting for only 29% of
the pool.

A reserve for all parity debt, funded by bond proceeds at 100% of MADS, is
available to make up shortfalls that could potentially occur due to any missed
local bond debt service payments. As of March 31, 2010, the market value of the
debt service reserve fund equaled $149 million. In addition, the bond bank
maintains a $17 million discretionary reserve, which is not pledged to
bondholders but may be used if a deficiency occurs. The combined $166 million in
reserves and discretionary funds equals approximately 14.8% of principal on
bonds outstanding, including the series 2010A and 2010B bonds.

Additional credit enhancement is provided by a state intercept, whereby in the
event a borrower defaults on a local bond payment, the bond bank has the ability
to intercept any funds held by the state treasurer that are payable to the
borrower. This protection is particularly effective for school districts, which
receive a large percentage of their revenues in the form of state aid. Finally,
there is a moral obligation by the state, albeit not a legal requirement, to
replenish the debt service reserve if it falls below its minimum specified
level. Neither the intercept nor the debt service reserve make-up provision has
ever been utilized because the bond bank has never had a borrower default.

Fitch analyzed the default tolerance of the general tax-exempt fund group's
portfolio using a stress test it also applies to state revolving funds and other
municipal loan pools. The stress test considers a portfolio's credit quality,
diversification, and single risk concentration. The bond bank's reserves are
sufficient to pay bonds even if scheduled repayments on the local bonds fall
short by 26.8% for the next four years, and no action is taken by the state to
replenish the reserve fund. A repayment shortfall this severe is in excess of
what Fitch would expect to occur in an 'AAA' stress scenario, given the
characteristics of the bond bank's portfolio.

Applicable criteria on Fitch's web site at www.fitchratings.com include:

--'Revenue-Supported Rating Criteria' (Dec. 29, 2009);

--'State Revolving Fund and Municipal Loan Pool Rating Guidelines' (April 28,
2008).

Additional information is available at www.fitchratings.com.

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 Ratings
Adrienne M. Booker, +1-312-368-5471 (Chicago)
David Litvack, +1-212-908-0593 (New York)
or
Cindy Stoller, +1-212-908-0526
(Media Relations, New York)
cindy.stoller@fitchratings.com

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