Bangkok--22 Jun--Standard & Poor's
Standard & Poor's Ratings Services assigned its 'AA' long-term rating, and stable outlook, to New Mexico's $218.45 million series 2009A severance tax bonds.
At the same time, Standard & Poor's affirmed its 'AA' long-term rating and underlying rating (SPUR) on the state's parity severance tax bonds and its 'AA-' SPUR on the state's subordinate supplemental severance tax debt. The outlook is stable.
The ratings reflect what we view as New Mexico's:
-- Strong debt service coverage (DSC) by fiscal 2008 severance tax revenues of 5.4x scheduled senior maximum annual debt service (MADS) and 4.7x total senior and supplemental bond MADS;
-- Adequate bond provisions, including an additional bonds test that requires at least 2.0x DSC on the senior bonds and 1.6x DSC on the subordinate long-term supplemental bonds; and
-- Rapid debt amortization, with all principal to be retired by 2019.
Mitigating these credit strengths in our opinion are the inherent instability associated with natural gas and oil prices and production levels, which account for the bulk of pledged revenues; and the state's geographic limitations in serving natural gas markets due to its location.
"The stable outlook reflects our expectation that despite the state's forecast of declining revenues and additional bond plans, severance tax collections will continue to provide strong DSC in the bonds' relatively short 11-year life," said Standard & Poor's credit analyst Sussan Corson. "The outlook also reflects our expectation that natural gas and oil reserves will continue to be replenished to maintain sufficient production over the bonds' life," Ms. Corson added.
A lien on money deposited into the severance tax bonding fund, including net tax receipts generated from natural gas and oil and other severed natural resources in New Mexico, secures the severance tax bonds. A second lien on pledged revenues secures the supplemental severance tax bonds. Officials will use series 2009A bond proceeds to refund a portion of debt outstanding and finance various statewide capital projects primarily authorized for 2009, including water, higher education, economic development, and state building projects.
RELATED RESEARCH
USPF Criteria: "Special Tax Bonds," June 13, 2007
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Media Contact:
Ana Sandoval, New York (1) 212-438-5095, [email protected]
Analyst Contacts:
Sussan Corson, New York (1) 212-438-2014
Gabriel Petek, CFA, San Francisco (1) 415-371-5042
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