Fitch Affirms Kentucky SPBC's Project 91 Revenue Bonds at 'A+'

NEW YORK--(BUSINESS WIRE)--

Fitch Ratings affirms the 'A+' rating on the following Kentucky State Property and Buildings Commission (SPBC) revenue bonds as part of its continuous surveillance effort:

--$14.7 million in outstanding agency fund revenue bonds, project 91.

The Rating Outlook is Negative.

SECURITY

The project 91 bonds are special and limited obligations of the SPBC, payable solely from revenues derived under financing/lease agreements between the commission, as lessor, and the commonwealth's finance and administration cabinet and the Kentucky River Authority (authority), as lessee. In addition, the commonwealth's secretary of finance has covenanted to seek commonwealth general fund appropriations to replenish the debt service reserve in the event of a draw upon it.

KEY RATING DRIVERS

BONDS PAID BY KENTUCKY RIVER AUTHORITY: The rating, one notch below that of most of the commonwealth's appropriation debt, reflects the narrow source of pledged funds, which are derived from the revenues of the authority rather than the general fund. Fiscal 2011 revenues provided 1.3 times (x) coverage of maximum annual debt service (MADS).

MOST STATE DEBT IS APPROPRIATION BACKED: Kentucky has a well-established mechanism for lease financing, highlighted by automatically renewable leases and covenants to seek appropriation for debt service. The commonwealth's debt is primarily in the form of lease rental bonds, requiring appropriation, and appropriations debt is recognized and accepted as commonwealth debt obligations.

GENERAL FUND MORAL OBLIGATION: The commonwealth has covenanted to request general fund appropriations for replenishment of the reserve fund to its requirement of MADS upon a draw down, mitigating concerns about the narrow pledged revenue source.

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Fitch Affirms Kentucky SPBC's Project 91 Revenue Bonds at 'A+'