NEW YORK - Standard & Poor's Ratings Services said it has placed its AA long-term rating on the state of Iowa's IJOBS program special obligation taxable Build America bonds series 2009B on CreditWatch with negative implications because the funding of the debt service reserve fund associated with the bonds did not reach an amount equal to maximum annual debt service (MADS).
The issuer originally planned to fund the debt service reserve fund for these 2009B special obligation bonds to a level equivalent to MADS, consistent with our criteria.
However, the debt service reserve was instead initially funded at $22.095 million, a level equal to 10% of par.
This was $24.93 million below MADS for this issuance. The state planned to increase the debt service reserve through annual cash contributions beginning on July 1, 2010 (fiscal year-end: June 30) to build bond reserves to MADS.
The state has now amended that plan with the pending issuance of the series 2010B taxable special obligation bonds, scheduled to be issued in September 2010.
"We understand that a portion of the series 2010B bond proceeds will be deposited into a taxable bonds account of the bond reserve fund for the series 2009B bonds in order to increase total debt service reserves to MADS," said Standard & Poor's credit analyst Helen Samuelson. "We expect to revise the outlook to stable once we receive confirmation that the deposit has been made. Failure to fund the reserve could result in a lowering or withdrawal of the rating," she added.
