Oregon has received top short-term ratings from the credit rating agencies ahead of its $643 million tax anticipation notes sale next week.
The notes, which are backed by the state’s full faith and credit, will mature on July 31, 2014.
Proceeds from the offering will be used to finance Oregon’s general fund cash flow needs in fiscal 2014, the first year of the state’s fiscal 2014-2015 biennium.
“The state annually issues TANs to efficiently manage its cash flow imbalances,” said Standard & Poor’s credit analyst Gabriel Petek. “Sized at $650 million for cash flow planning purposes, the state’s 2013 TAN issue will approximately equal its 2012 note offering. At this amount, note proceeds would equal 8.1% of expected fiscal 2014 general fund receipts.”
Standard & Poor’s assigned the notes its highest short-term rating at SP-1-plus, citing the state’s strong creditworthiness, with a AA-plus long-term rating and stable outlook, and good coverage of TAN principal and interest from general fund sources.
Fitch Ratings assigned its F1-plus rating, noting the strength of the full faith and credit pledge, as well as the state’s strong financial management, which offsets revenue volatility.
Fitch also rates Oregon’s long-term general obligation debt at AA-plus.
“Fitch’s rating, at ‘F1+’, is based on the very large and stable amounts of interfund borrowables, which together with available general fund resources are the source of the notes’ security,” analysts wrote in a report. “Monthly balances in the borrowable funds have recently averaged over $16 billion, providing over 27 times coverage for fiscal 2014 note repayment.”
Moody’s Investors Service said its MIG 1 rating also reflects the state’s full faith and credit pledge, as well as its satisfactory cash balances projected at the end of the biennium, and the strong liquidity afforded by borrowable resources available from other state funds.
Analysts said some credit challenges include a high reliance on economically sensitive personal income taxes and above-average debt ratios.
Moody’s rates the state’s long-term debt at Aa1.
