Fitch Rates $132MM Virginia College Building Auth Ed Facil Revs 'AA+'; Outlook Stable
Fitch Ratings has assigned an 'AA+' rating to the following Virginia College Building Authority (VCBA) bonds:
--$132,405,000 educational facilities revenue and refunding bonds (Public Higher Education Financing Program) series 2012B.
The bonds are expected to sell via competition on Oct. 30, 2012.
In addition, Fitch has affirmed the 'AA+' rating on the authority's outstanding educational facilities revenue bonds (Public Higher Education Financing Program) and educational facilities revenue bonds (21st Century College and Equipment Program).
The Rating Outlook is Stable.
The bonds are limited obligations of the authority, secured by payments due pursuant to loan agreements with participating higher education institutional borrowers.
KEY RATING DRIVERS
--ABILITY TO INTERCEPT STATE-APPROPRIATED FUNDS: The rating reflects provisions allowing the Commonwealth of Virginia to intercept state-appropriated funds to borrowing higher education institutions, as well as substantially all of the revenues generated locally at each, in the event of non-payment under loan agreements with the authority.
--AMPLE TIME TO EXECUTE INTERCEPT: Institutional note payments are due 15 days prior to the semiannual debt service on the bonds, providing ample time for the intercept payments to be made.
--CENTRALIZED NATURE OF DEBT: The commonwealth's debt is centralized, and projects and financings require legislative and executive branch approval.
--'AAA' COMMONWEALTH GO RATING: The commonwealth's GO bonds are rated 'AAA' by Fitch, reflecting Virginia's substantial economic resources, conservative approach to financial operations, and lower-moderate debt burden.
Under loan agreements, participating institutions pledge their general revenues to make payments on institutional notes, which are paid directly to the trustee in amounts sufficient to pay debt service on the bonds. General revenues include virtually all of an institution's locally-generated revenues not otherwise committed, including tuition and fees, as well as general and non-general fund commonwealth appropriations.
The rating on the bonds is linked to that of the commonwealth as a result of the intercept provisions, which provide that if an institution fails to make payments on its note, the state comptroller is required upon direction from the governor to make an intercept payment immediately to the owners of the institutional note. Institutional note payments are due 15 days prior to the semiannual debt service on the bonds, providing ample time for the intercept payments to be made. The intercept payments are made from any appropriation of general revenues available to a given institution, which is extremely broad, providing multiple levels of coverage at the time payments are required. The higher education system in Virginia has wide state support.
The series 2012B bonds, as well as earlier series, are issued under a 1997 master indenture. Each note is issued separately by each institution to the authority, pursuant to separate loan agreements. This is the 20th series of bonds to be issued under the program.
The commonwealth's 'AAA' GO bond rating reflects its substantial economic resources, conservative approach to financial operations, and lower-moderate debt levels. For more information on the commonwealth's GO rating, please see the Fitch release titled 'Fitch Rates VA Public School Auth School Tax Credit Bonds 'AA+'; Affirms VA GOs at 'AAA' dated Oct. 4, 2012 and available at 'www.fitchratings.com'.
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 Related Research:
--'Tax-Supported Rating Criteria' (Aug. 14, 2012);
--'U.S. State Government Tax-Supported Rating Criteria' (Aug. 14, 2012);
--'Rating Guidelines for State Credit Enhancement Programs' (June 19, 2012).
Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
U.S. State Government Tax-Supported Rating Criteria
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