TEXT-Fitch rates Va. Public School Authority financing bonds 'AA+'
Dec 4 - Fitch Ratings assigns an 'AA+' rating to the following Virginia Public School Authority (VPSA) bonds: --$62,750,000 school financing bonds (1997 resolution) series 2012 D. The bonds are expected to sell through negotiation on or about Dec. 11, 2012. The bonds are being issued for refunding purposes for debt service savings. In addition, Fitch affirms the 'AA+' ratings on outstanding VPSA school financing bonds and school education technology notes. The Rating Outlook is Stable. SECURITY VPSA school financing bonds are secured by general obligation (GO) bond payments from participating localities that are pledged by the authority to the bonds. A sum-sufficient appropriation for any shortfalls in debt service that is available from the commonwealth's literary and general funds enhances credit quality and provides the basis for the rating. KEY RATING DRIVERS COMMONWEALTH APPROPRIATION OBLIGATION: The 'AA+' rating, one notch below the commonwealth's GO rating, is based on the availability of a sum-sufficient appropriation for debt service deficiencies from the commonwealth's literary fund and, if necessary, the general fund. 'AAA' COMMONWEALTH GO RATING: The commonwealth's GO bonds are rated 'AAA' by Fitch, reflecting Virginia's substantial economic resources, conservative approach to financial operations, and lower-moderate debt burden. SUM-SUFFICIENT APPROPRIATION REQUIRED TO BE SOUGHT ANNUALLY: Statute requires that the governor request the sum-sufficient appropriation biennially, with such appropriation subject to General Assembly approval. STATE AID INTERCEPT AVAILABILITY: A tested state aid intercept mechanism, intended to be tapped first in the event of a local school bond payment default, exists to cure any local loan deficiencies. LOCAL LOANS ARE GOs OF BORROWERS: All local loans made under the program represent general obligations of the borrowing units, and none have defaulted in VPSA's history. CREDIT PROFILE The series 2012 D bonds are being issued pursuant to the 1997 resolution, which includes a 'sum sufficient' appropriation from available moneys of Virginia's literary fund and, if those are not adequate, the general fund. The appropriation, which the governor must request from the General Assembly pursuant to statute, bolsters the local government loan repayments that are the primary source of security. Additional strength derives from state law providing for the withholding of state payments to local governments in the event of a local loan payment default, along with Virginia's commitment to education. Bond proceeds are used to acquire GO school bonds of local borrowers. Local payments of principal and interest to be made on the local school GO bonds are used to pay debt service on the authority's school financing bonds. No local government has defaulted in VPSA's history, but in the event of a default, state law requires the intercept of state payments due to the local unit until the default is cured. Local payments are due approximately 15 days in advance of bond payments, allowing time for implementation of the intercept. Finally, if required, the sum sufficient appropriation would be used. The commonwealth's 'AAA' GO bond rating reflects its substantial economic resources, conservative approach to financial operations, and lower-moderate debt levels. For more information on the commonwealth's GO rating, please see the Fitch release titled 'Fitch Rates VA Public School Auth School Tax Credit Bonds 'AA+'; Affirms VA GOs at 'AAA' dated Oct. 4, 2012 and available at 'www.fitchratings.com'. Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings. 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 U.S. State Government Tax-Supported Rating Criteria