Bangkok--15 Jul--Standard & Poor's
Standard & Poor's Ratings Services assigned its 'SP-1+' short-term rating to Colorado's $255 million education loan program tax and revenue anticipation notes (E-TRANs), series 2009A.
"The rating reflects the state's large pool of investments, which serve as backup liquidity for the notes in the event that the primary source of security -- several pledges from a pool of school district borrowers for note principal and a pledge of state general fund moneys for note interest -- is insufficient to repay the notes," said Standard & Poor's credit analyst Matthew Reining.
The state's two primary sources of backup liquidity, the state education fund and state highway fund (not including other funds), are sufficient to cover total principal by 5.6x. The state's most current projections identify $300 million in parity notes, for a total of $555 million, in fall 2009, which would lower anticipated coverage to a still very strong 3.1x. However, the state has also indicated that the total program principal outstanding could be in the $600 million to $650 million range, which could lower final coverage somewhat.
The principal of the 2009A E-TRANs is secured on a several basis by repayments from the individual school districts in the pool, as well as the state's pledge of other available investments should school loan repayments be delinquent. Payment of E-TRAN interest is a state general fund responsibility. State law provides for a direct deposit to the state treasurer by county treasurers of school district property taxes to the extent local school districts do not repay their obligations to the state. All school district cash flow obligations must be repaid by June 25, 2010, shortly before the close of the fiscal year. School obligations repay only TRAN principal. The state must pay the interest-cost component of the education loan TRANs out of its general fund. In practice, the state plans to make a full deposit of series 2009A note interest to the note repayment account from a state general fund appropriation at the time of TRAN closing, pursuant to the note resolution. All schools participating in last year's series 2008A and 2008B E-TRAN pool paid their fiscal 2009 school obligations on a timely basis. The state treasurer will invest 2009A and 2009B school loan repayments until note maturity on Aug. 12, 2010.
The E-TRANs will fund the state's interest-free cash flow loan program for local school district borrowers and reduce the amount of separately secured state general fund TRAN borrowing. The school borrowing program for cash flow provides interest-free loans to local school district borrowers for purposes of meeting yearly cash flow needs. The state expects these notes, along with notes to be issued later in the fiscal year, to fund cash flow needs for 26 participating school districts in fiscal 2010.
RELATED RESEARCH
USPF Criteria: "Short-Term Debt," June 15, 2007
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Media Contact:
Ana Sandoval, New York (1) 212-438-5095, [email protected]
Analyst Contacts:
Matthew Reining, San Francisco (1) 415-371-5044
David G Hitchcock, New York (1) 212-438-2022
Key Contacts:
Americas Media Relations: (1) 212-438-6667
media_ [email protected]
Americas Customer Service: (1) 212-438-7280
[email protected]