Nov 29 - Fitch Ratings assigns its 'AAA' to bank bonds associated with the
New York City Transitional Finance Authority's (TFA) $248,000,000 future tax
secured bonds (multi-modal bonds) fiscal 2013 series C consisting of:
$100,000,000 subseries C-4 and $148,000,000 subseries C-5.
The Rating Outlook is Stable.
The rating is being assigned in conjunction with the issuance of the
above-referenced bonds, which are expected to close on Dec. 4. The bonds will
have liquidity support from a standby bond purchase agreement provided by
JPMorgan Chase, N.A. (subseries C-4) and a standby letter of credit issued by
Sumitomo Mitsui Banking Corporation (subseries C-5) (the agreements). For more
information on the bonds and the liquidity support, see 'Fitch Rates New York
City Transitional Finance Authority's 2013 Series C Subseries C-4 and C-5 Bonds
Based on a review of the terms governing bank bonds specified in the associated
agreements it is Fitch's opinion that the incremental risk associated with bank
bonds does not have a material impact on TFA's long-term credit rating.
The bonds are payable from revenues derived from a personal income tax (PIT) and
a sales and use tax imposed by the city, as authorized by the state. Payment of
the PIT and sales tax revenue to the TFA is not subject to city or state
Sales tax revenues will be available for the payment of bonds if PIT revenues
are projected to be insufficient to provide at least 150% of the maximum annual
debt service (MADS) on the TFA's outstanding bonds.
Senior bonds are subject to a $330 million limit on quarterly debt service.
Additional bonds may be issued as senior bonds if tax revenues for the 12
consecutive calendar months preceding authorization is at least 3x the amount of
annual senior debt service or $1.32 billion.
The subordinate additional bonds test (ABT) requires that tax revenues for the
most recent fiscal year are at least 3x the sum of $1.32 billion plus projected
subordinate debt service.
KEY RATING DRIVERS
STRONG LEGAL FRAMEWORK: The bankruptcy-remote, statutorily defined nature of the
issuer and a bond structure involving a first perfected security interest in the
PIT and sales tax revenues are key credit strengths. Payment of the PIT and
sales tax revenue to the TFA is not subject to city or state appropriation.
Statutory covenants prohibit action that would impair bondholders.
TAX RATE RISK LOW: The state can unilaterally modify or repeal tax law as it
relates to the PIT or sales tax and could risk default by exercising this right
in an extreme city fiscal crisis scenario. Fitch believes that the risk of this
STATUTORY CASH FLOW PROVISIONS: The PIT and sales tax are imposed by the city
pursuant to state statute and collected by the state. Revenues from the PIT (and
the sales tax, if required) flow directly from the state comptroller to the TFA
trustee and are not subject to state or city appropriation. The city receives
residual revenues only after advance quarterly funding of debt service.
ROBUST COVERAGE: Although senior bonds have a first claim on statutory revenues,
Fitch does not make a rating distinction between the liens due to the high
coverage levels. Debt service coverage on all future tax secured (FTS) bonds
from fiscal 2012 audited revenue was 9.2x. Even with sizable debt issuance plans
over the next four years, pro forma MADS coverage is expected to remain strong.
SOLID ECONOMIC UNDERPINNINGS: Statutory revenues are derived from a broad
economic base with high income levels, benefiting from the city's unique role as
a national and international center for commerce and culture. The city's per
capita personal income is 130% of the national average.
DEPENDENCE ON WALL STREET: Financial activities account for about 12% of jobs
and 30% of earnings. Recession-related job declines have been well under
comparable national averages although weakness in financial services employment
is evident. The city's unemployment rate is above average and has recently been
trending higher, which may negatively affect future pledged revenue growth.
In addition to the sources of information identified in Fitch's Tax-Supported
Rating Criteria, this action was additionally informed by information from
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. Local Government Tax-Supported Rating Criteria' (Aug. 14, 2012).
Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
U.S. Local Government Tax-Supported Rating Criteria