Fitch Rates New Hampshire Municipal Bond Bank 2006B Revs 'AA+'; Outlook Positive

Business Wire, Nov 29, 2006

NEW YORK -- Fitch Ratings assigns an 'AA ' rating to approximately $20.3 million New Hampshire Municipal Bond Bank 2006 series B nonguaranteed bonds (2005 General Bond Resolution). The Rating Outlook is Positive. The bonds are scheduled to sell via competitive bid on Dec. 6. In addition, Fitch affirms the 'AA ' rating on The New Hampshire Municipal Bond Bank's (bond bank or NHMBB) $100 million of outstanding 2005 General Bond Resolution Bonds. The Rating Outlook remains Positive. NHMBB will loan the 2006B proceeds to six local governmental entities for various capital improvements. At this time, Fitch also affirms the 'AAA' rating on the bond bank's $757.7 million outstanding NHMBB (1978 General Resolution) bonds. The Rating Outlook is Stable.

The 'AA ' rating on the 2005 resolution bonds reflects the development of NHMBB's start-up loan pool, which expands to 19 borrowers from only one borrower over a year ago. The Positive Rating Outlook reflects Fitch's expectation that the pool of borrowers will continue to grow and diversify over the next few years, improving the credit quality of the bonds issued under the 2005 General Bond Resolution. NHMBB created the pool pursuant to a new bond resolution in July 2005 under which future nonguaranteed bonds are expected to be issued to fund loans for local entities. The existing 1978 General Resolution will remain open for additional bond issues; however, NHMBB anticipates that it will only be used for future bond refundings that would generate economic savings. Although the 2005 bond resolution is structured similarly to the 1978 resolution, the new resolution updates certain standard provisions and authorizes the bond bank to use a surety or other credit facility to fund its required debt service reserve.

The 'AA ' rating on the 2005 resolution bonds is also based on the strong legal provisions which mirror those in the 1978 resolution, the high credit quality of the two largest borrowers (Bedford School District and Kearsarge Regional School District), and NHMBB's successful development and management of existing loan pools. The bonds are secured by general obligation backed borrower loan repayments. Additional enhancement is provided by a debt service reserve fund, a state-aid intercept, and a state moral obligation make-up provision. Currently, most of New Hampshire's eligible municipalities use the bond bank as their primary borrowing vehicle because it offers local government borrowers the lowest cost of capital. A reserve for all parity debt, at the least of 10% of bond par, 125% of average annual debt service or maximum annual debt service, is available to make up shortfalls that could potentially occur due to any missed repayments.

The 'AAA' rating on the 1978 resolution bonds reflects a diversified loan portfolio, with approximately 200 borrowers from various cities, towns, counties, school districts, and other local government units throughout the state. All loans are backed by the borrowers' general obligation pledge. The Exeter Region Cooperative School District accounts for 6% of the total outstanding loan balance, and the top 10 borrowers comprise 39% of the total outstanding loan balance. Approximately 64% of the loans outstanding are to school districts, each of which receive an allocation of the state property tax and many of which also receive 'adequate education grants' from the state. A reserve for all parity debt, funded by bond proceeds at 100% of maximum annual debt service, is available to make up shortfalls that could potentially occur due to any missed repayments.

For the 1978 and 2005 resolution bonds, additional credit enhancement is provided by a state aid intercept, whereby, in the event a borrower defaults on a loan repayment, the bond bank can intercept any state funds payable to that borrower. An additional layer of support is a moral obligation of the state, albeit not a legal requirement, to replenish the debt service reserve if it falls below its minimum specified level. Neither the intercept nor the moral obligation has ever been utilized, because no borrower has defaulted on a loan repayment since the bond bank began operations in 1977.

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