S&P Afms Alaska Hsg Finance's 'A+' Issuer Credit Rtg Alaska Hsg Fin Corp

Business Wire, July 28, 1998

NEW YORK--(BUSINESS WIRE)--July 28, 1998--Standard & Poor's CreditWire 7/28/98--Standard & Poor's affirmed its single-'A'-plus issuer credit rating on Alaska Housing Finance Corp. (AHFC). Standard & Poor's also affirmed its ratings on some of AHFC's outstanding debt (see list below).

The affirmations follow Alaska Governor Tony Knowles' approval of capital plan legislation for the corporation. The law was adopted by the state legislature in response to $1.5 billion in statewide capital needs amid an operating budget deficit caused by declining oil revenues. Alaska has historically funded its capital needs on a pay-as-you-go basis from unrestricted general fund revenue, 80% of which is derived from oil-related activity in the state.

The legislation authorizes AHFC to spend $721 million over seven years to fund the plan, which will finance deferred maintenance and construction for housing, schools, and harbors. The law minimally obligates AHFC to issue $224 million of unsecured capital project bonds and annually cash-fund a capital budget. The state legislature will appropriate corporation funds for the capital budget based on corporate earnings available in excess of debt service on the bonds. AHFC's total outlays will be capped at total net income from the preceding fiscal year.

AHFC management projects that $103 million of earnings will be available on an annual basis to pay debt service on the bonds and fund the capital budget. Standard & Poor's expects that the corporation's total annual outlays will not exceed the targeted $103 million amount, despite a provision in the law that allows for legislative appropriation of additional amounts.

Standard & Poor's opinion in this regard is based on precedent involving a net income-based transfer agreement that existed between AHFC and the state commissioner of revenue. The state fully complied with the terms of the nonbinding agreement, which required the corporation to annually pay $103 million to the state, split between a $50 million general fund transfer and a $53 million capital budget.

Legislative codification of AHFC transfers to the state is positive for the corporation's credit quality. However, appropriation risks continue to plague AHFC as the state grapples with potential budget deficits and significant deferred infrastructure needs. The corporation's issuer credit rating has always reflected the risk of the state's appropriation of its large and liquid unrestricted capital base, in addition to a high-risk mortgage loan portfolio, and debt maturities which extend beyond the Prudhoe Bay oil curve. These risks continue to be counter balanced by AHFC's vital and central role as the provider of affordable housing for the state, its exceptional capital adequacy measures, strong profitability during stable economic periods, and a capable management team.

OUTLOOK: STABLE The outlook reflects AHFC's financial and managerial strength and the expectation that asset transfers and capital expenditures for the state will remain at manageable levels, Standard & Poor's said. -- CreditWire

OUTSTANDING RATINGS AFFIRMED

Rating $150 million Eurocommercial paper program A-1 $90.04 million housing development bonds (various ser) A $199.95 million general housing purpose bonds (various ser) A $33 million government purpose bonds (University Of Alaska)

series 1997A A /A-1

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