Dec 5 - Fitch Ratings affirms its 'AAA' rating on the following Pennsylvania
Infrastructure Investment Authority (Pennvest) bonds:
--$3.9 million outstanding loan pool program revenue bonds (1990 indenture)
The Rating Outlook is Stable.
The bonds are secured by loan repayments payable from local government entities,
reserves, and investment earnings.
KEY RATING DRIVERS
STRONG FINANCIAL STRUCTURE: Fitch's cash flow modeling demonstrates that
Pennvest's revolving fund program can continue to pay bond debt service even
with portfolio loan defaults of 100.0% (the default tolerance rate) through
final maturity in 2014. This is in excess of Fitch's 'AAA' liability default
hurdle of 40.9% as produced using Fitch's Portfolio Stress Calculator (PSC),
which is derived based on overall pool credit quality as measured by the rating
of underlying borrowers, size, loan term, and concentration.
SOLID PROGRAM MANAGEMENT: Pennvest maintains formal monthly loan monitoring
procedures. While there are no delinquent or defaulted borrowers in the pledged
portfolio, Pennvest has experienced certain loan defaults and delinquencies in
its direct loan pool, which are not pledged to bond holders.
STRONG LOAN SECURITY: The underlying loan security is strong with all loans
backed by the borrowers' general obligation or utility system pledges, or a
combination of both.
Established in 1988, Pennvest provides loans and grants to Pennsylvania
localities and some private entities for drinking water, wastewater, stormwater,
and nonpoint source pollution control system improvements. Pennvest has no plans
to issue additional bonds to fund loans under the 1990 bond indenture.
OVERCOLLATERALIZATION AND RESERVES SIGNIFICANTLY ENHANCE BONDS
All pledged loan repayments are projected to provide minimum annual debt service
coverage of 4.7 times (x) until final bond maturity in 2014. The program also
maintains a debt service reserve fund totaling approximately $2 million, which
is currently invested in a collateralized repurchase agreement. The program can
withstand 100% loan defaults even if the available reserve fund is not applied.
The pledged loan pool of 82 borrowers is concentrated with the largest ten
borrowers accounting for approximately 74% of the total portfolio. The entire
loan principal is secured by general obligation, utility system, or combination
The loan portfolio is well seasoned as it was funded from Pennvest bond proceeds
and commonwealth contributions from 1988 to 1994.
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