Fitch Rts Ohio Department of Transportation State Infrastructure Bank Bond Fund Revs 'AA'

Business Wire,  July 15, 2008  

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CHICAGO & NEW YORK -- Fitch Ratings assigns an 'AA' rating to $5.2 million State of Ohio (the state) taxable transportation project revenue bonds, state transportation infrastructure bond fund, series 2008-1. Proceeds of this issue will be used to fund program reserves for the Ohio Department of Transportation's (ODOT) newly created state infrastructure bank (SIB) federal bond fund program. The bonds will be issued by the Ohio Treasurer and will be privately placed. The Rating Outlook is Stable.

The 'AA' rating reflects the strong program structure, which provides multiple layers of security. Other rating factors include the program's sound underwriting guidelines and moderate borrower concentration. Apart from the current issue, no leveraging of the SIB has occurred. However, future leveraging is anticipated, which will fund loans to political subdivisions throughout the state for federal and state highway and transit projects.

All bonds issued under the master trust indenture are secured on a parity basis by loan repayments and program equity and reserves. There are currently 47 loans to 38 borrowers with outstanding principal totaling $64 million. As of June 30, 2008, program equity was almost $40 million. Additionally, program reserves, including the use of proceeds from the current offering, will be funded at the greater of $5 million or 5% of bonds outstanding; the state provides a moral obligation to replenish the reserve if it falls below its required level. The master indenture requires a cash flow coverage ratio of at least 1.2 times (x) debt service.

Under the SIB federal program, ODOT will only underwrite loans to political subdivisions or state agencies, which will use loan proceeds for essential assets. In addition, borrowers are typically required to maintain loan revenue coverage of 1.2x to 1.0x. Furthermore, ODOT maintains single borrower concentration limits.

The pool's largest obligor is currently Muskingum County, which comprises approximately 17% of the loan portfolio. Future bond issues will finance additional loans to new borrowers, which will allow the pool to achieve greater diversity. Loans are secured by a variety of sources including gas, sales, bed, and property tax revenues, passenger facility charges, incremental taxes, maintenance and user fees, non-tax revenues, capital improvement project funds, and local appropriations.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.

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