Bangkok--22 Aug--Standard & Poor's
Standard & Poor's Ratings Services assigned its 'AA' long-term rating, and stable outlook, to the Ohio Building Authority's 2011 series A state facilities refunding bonds (administrative building fund projects), 2011 series B state facilities refunding bonds (adult correctional building fund projects), and 2011 series B state facilities refunding bonds (juvenile correctional building fund projects). At the same time, Standard & Poor's affirmed its 'AA' rating on the parity debt outstanding.
The rating reflects what we view as:
The general creditworthiness of Ohio (AA+/Stable) as lessee;
The state's demonstrated commitment, within both the administrative and legislative branches, to repaying its appropriations-backed obligations;
Strong contractual provisions that include an absolute and unconditional payment provision upon biennial appropriation; and
The importance of appropriation debt to the state's overall capital bonding structure, with proceeds used to fund Ohio's essential capital requirements.
State lease-rental payments, subject to biennial appropriation, secure the bonds. We understand that bond proceeds will be used to refund certain bonds outstanding and provide debt service savings to Ohio.
On July 15, 2011, Standard & Poor's affirmed its 'AA+' rating on Ohio's GO bonds, and revised the outlook to stable from negative to reflect the state's progress in restoring structural budget balance through fiscal 2013 and the modest economic recovery underway, which we believe has stabilized revenues.
"The stable outlook on Ohio reflects our view of the state's progress in moving toward structural budget balance through fiscal 2013 and the modest economic recovery underway, which has stabilized revenues and allowed for a contribution to the budget stabilization reserve fund," said Standard & Poor's credit analyst Robin Prunty.
The state, we believe, has proactively responded to budget imbalance over time, and this is also factored into the current outlook. We do not see potential for raising the rating in the near term given Ohio's below-average economic performance and diminished financial flexibility. Downside risk for the rating includes the potential for significant reductions in federal funding that currently flows to the state. Standard & Poor's will continue to monitor the federal consolidation efforts stemming from the Budget Control Act and, once these are identified, will evaluate their effect on the state's finances and officials' response to these revenue reductions.
RELATED CRITERIA AND RESEARCH
USPF Criteria: State Ratings Methodology, Jan. 3, 2011
USPF Criteria: Appropriation-Backed Obligations, June 13, 2007
Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column.
Media Contact:
Olayinka Fadahunsi, 1(212) 438-5095,
[email protected]
Analyst Contacts:
Robin Prunty, New York (1) 212-438-2081
Richard J Marino, New York (1) 212-438-2058