CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has assigned an 'AA-' rating to the New Hampshire Municipal Bond Bank's (NHMBB) approximately $22.5 million 2009 series C non-guaranteed bonds, issued under the 2005 General Bond Resolution (the 2005 resolution). The 2009C bonds are scheduled to sell on June 9 via negotiation. The NHMBB will loan the proceeds to nine local governmental entities for various capital improvements. Fitch also affirms and removes from Rating Watch Negative the 'AA-' ratings on the NHMBB's $227 million outstanding 2005 general bond resolution debt. The Rating Outlook is Stable.

The 'AA-' rating reflects the quality, size, and diversification of the NHMBB's 2005 resolution borrower pool and multiple layers of program security. The 2005 Resolution bonds were placed on Rating Watch Negative on Nov. 26, 2008 after the NHMBB discontinued use of the 2005 Resolution in favor of its 1978 General Bond Resolution; Fitch was concerned that the 2005 Resolution borrower pool would become less diversified as the existing loans ran off. However, this concern is mitigated by the current bond issue, and management's representation that the program will continue to issue new bonds through the 2005 Resolution in the future.

The 2005 resolution bonds are secured primarily by loan repayments from 56 local government units, with most of the loans backed by general obligation pledges. The borrower pool continues to diversify, with the largest obligor, Bedford School District, accounting for approximately 16% of the portfolio's principal balance, down from 23% in December 2007. The portfolio's loan credit quality is high, as approximately 81% of the borrowers have investment-grade credit characteristics. In the unlikely event of a missed loan payment, the NHMBB has the ability to intercept any state funds payable to a borrower and use it for the loan payment.

Parity bonds issued under the 2005 Resolution are secured by a debt service reserve fund (DSRF) at the least of 10% of par, or 125% of average annual debt service or maximum annual debt service. The 2005 Resolution authorizes the bond bank to use a surety or other credit facility to fund its required debt service reserve. If moneys from the DSRF are needed to satisfy deficiencies in the debt service account, the resolution requires that all cash or investments held in the DSRF be exhausted first.


After this issue, reserves for the 2005 Resolution bonds will be funded with cash totaling approximately $1.8 million. Reserves are also funded with surety policies from three providers totaling $18 million: Financial Security Assurance Inc. (Insurer Financial Strength [IFS] rated 'AA+', with a Negative Rating Watch by Fitch) $3.4 million; Financial Guaranty Insurance Co.(not rated by Fitch) $6.8 million; and MBIA Insurance Corp. (not rated by Fitch) $8.2 million. Due to severe credit deterioration over the last year and a half, Fitch assigns no value to the FGIC and MBIA sureties.

Fitch's analysis of the NHMBB's 2005 resolution bond program also considers a moral obligation pledge, albeit not a legal requirement, by the State of New Hampshire (GO bonds rated 'AA', with a Stable Outlook) to replenish the debt service reserve fund if it falls below its minimum specified level. Neither the moral obligation nor the state funds intercept has ever been utilized, because no borrower has defaulted on a loan repayment since the bond bank began operations in 1977.

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.





Fitch Ratings

Adrienne M. Booker, +1-312-368-5471 (Chicago)

Karen Krop, +1-212-908-0661 (New York)

Cindy Stoller, +1-212-908-0526

(Media Relations, New York)

cindy.stoller@fitchratings.com



Source: Fitch Ratings