Fitch downgrades N.H. Bond Bank paper

The ratings of some of New Hampshire Municipal Bond Bank’s outstanding general resolution bonds have been downgraded, according to Fitch Ratings. They are still considered quality bonds, but Fitch did put the bonds on a negative rating watch.Fitch assigned $667 million of the bond bank’s outstanding general resolution bonds an “AA” rating, or “high grade, high quality,” from a previous rating of the highest “AAA” quality.The actions were taken because the bonds failed a “stress test,” which considers loan quality, single risk concentration, reserve fund size and debt service requirements.”The weakened stress test results are due to the portfolio’s lower credit quality estimate than in previous years, increased leveraging, a decrease in available but unpledged revenues and a higher level of pass-through savings to borrowers from a prior refunding than originally anticipated,” Fitch said.The failures were primarily due to the large number of small unrated school district borrowers in the portfolio, which comprise over 70 percent of total loan par, according to the ratings agency.Despite the relative weakness, Fitch analysts said the bond bank’s loan security was strong, “with virtually all loans backed by a general obligation pledge and additional protection from borrower defaults through a state-aid intercept mechanism.” – CINDY KIBBE/NEW HAMPSHIRE BUSINESS REVIEW