Bond Bank Bonds Drop

Moody’s Investors Service last week downgraded the New Hampshire Municipal Bond Bank’s 1978 resolution bonds to Aa3 from Aa2, affecting $660.8 million of outstanding debt, as the rating agency has a new rating methodology for pooled debt programs. The outlook is stable.

Moody’s placed the 1978 resolution on review for possible downgrade on Oct. 27.

Standard & Poor’s rates the credit AA and Fitch Ratings gives it an underlying AAA.

New Hampshire pledges its moral obligation to the $660.8 million of bonds. Moody’s rates the pledge Aa3, two notches below the state’s general obligation rating of Aa1.

If a pooled borrowing program has a state moral obligation backing the bonds, Moody’s will assign whichever rating is higher — the moral obligation rating or the program’s underlying rating.

Moody’s considers the underlying credit of the 1978 resolution bonds to be in the single-A category, below the moral obligation pledge’s Aa3.

“Based on our analysis, which considered both outstanding ratings and internal assessments, Moody’s believes that the credit quality of the pool is in the A range,” a Moody’s report reads. “Further, Moody’s believes that the average credit quality of the bank’s top 10 borrowers is in the Aa range.”

The bond bank is working on a $14.7 million Series 2010D bond sale under the 1978 resolution.

Moody’s rates the bonds Aa3. With the sale, the 1978 resolution will have 150 borrowers within its pool, including school districts, cities and towns, and water and sewer systems.

Most of the participants do not have an underlying rating from Moody’s.

There have been no defaults in the bond bank’s history. The state is able to direct aid to debt-service repayment in the event of one.

The bond bank has $12.9 million of state-guaranteed debt outstanding through its 1979 resolution, which Moody’s rates Aa1, equal to New Hampshire’s GO ­rating.

It also has $259.7 million of 2005 general resolution bonds outstanding that Moody’s rates Aa3. The 2005 resolution bonds are under review for possible downgrade.

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