Fitch takes rat­ing ac­tions on Texas Pub­lic Fi­nance Notes

The Pak Banker - - Front Page -


Global rat­ing agency Fitch will take var­i­ous rat­ing ac­tions on the short-term rat­ings of the fol­low­ing com­mer­cial pa­per (CP) notes of the State of Texas Pub­lic Fi­nance Author­ity (TPFA):

$8.25 mil­lion gen­eral obli­ga­tion CP notes, se­ries 2002A (tax-ex­empt), con­firmed at 'F1+', ef­fec­tive Nov. 16, 2012; $24 mil­lion gen­eral obli­ga­tion CP notes, se­ries 2002B (tax­ex­empt), con­firmed at 'F1+', ef­fec­tive Nov. 16, 2012; $150 mil­lion tax-ex­empt CP rev­enue notes, se­ries 2003, up­graded to 'F1+', from 'F1', ef­fec­tive Dec. 4, 2012;

$300 mil­lion gen­eral obli­ga­tion CP notes, se­ries 2008 (tax-ex­empt), up­graded to 'F1+' from 'F1', ef­fec­tive Nov. 26, 2012. The af­fir­ma­tion of se­ries 2002A and se­ries 2002B and the up­grade of se­ries 2003 and se­ries 2008 are based on the expected sub­sti­tu­tion of each se­ries' ex­ist­ing ex­ter­nal liq­uid­ity provider by liq­uid­ity pro­vided by the State of Texas un­der sep­a­rate se­ries liq­uid­ity agree­ments en­tered into be­tween TPFA and the Texas Comp­trol­ler of Pub­lic Ac­counts. In ad­di­tion, Fitch af­firms the 'F1+' short-term rat­ing on other out­stand­ing TPFA CP based on liq­uid­ity fur­nished by the state, as fol­lows: $171.8 mil­lion GO CP notes (Can­cer Preven­tion and Re­search In­sti­tu­tion of Texas Project), se­ries A (tax­able) and se­ries B (tax-ex­empt).

The GO CP notes are gen­eral obli­ga­tions to which the state pledges its full faith and credit. The CP rev­enues notes are spe­cial obli­ga­tions of TPFA payable from lease pay­ments of the state, sub­ject to bi­en­nial ap­pro­pri­a­tion.

Texas' long-term

'AAA' GO rat­ing re­flects its low debt burden, con­ser­va­tive fi­nan­cial op­er­a­tions and a growth-ori­ented econ­omy that con­tin­ues to out­pace na­tional av­er­ages. Fi­nan­cial pres­sures arise from the de­mand that rapid growth places on the state's con­sump­tion-based tax sys­tem, in­clud­ing longer-term trans­porta­tion needs and the state's com­mit­ment to ed­u­ca­tion. The bud­get for the fis­cal 2012-2013 bi­en­nium re­lied on sig­nif­i­cant cuts to base­line pro­jected spend­ing to main­tain bal­ance, while leav­ing the bal­ance of the eco­nomic sta­bi­liza­tion fund (ESF) un­touched. Ac­tual rev­enue col­lec­tions have con­sis­tently over-per­formed pre­vi­ous as­sump­tions since bud­get adoption, and the ESF bal­ance has grown to $6.1 bil­lion; the comp­trol­ler fore­casts that the bal­ance will rise to $8.1 bil­lion by the end of the fis­cal 20122013 bi­en­nium.

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