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Rating Action:

MOODY'S ASSIGNS Aa1 RATING TO $160.7 MILLION OF VIRGINIA EDUCATIONAL FACILITIES REVENUE BONDS, ISSUED THROUGH VCBA

Global Credit Research - 05 Mar 2012

APPROXIMATELY $8.4 BILLION OF NET TAX-SUPPORTED DEBT OUTSTANDING; OUTLOOK IS NEGATIVE

New York, March 05, 2012 -- Moody's Rating

Issue: Educational Facilities Revenue Refunding Bonds (Public Higher Education Financing Program), Series 2012A; Rating: Aa1; Sale Amount: $160,740,000; Expected Sale Date: 03/06/2012; Rating Description: Lease Rental: Appropriation

Opinion

Moody's Investors Service has assigned Aa1 ratings to the Commonwealth of Virginia's $160.7 million Educational Facilities Revenue Refunding Bonds (Public Higher Education Program, Series 2012A issued through the Virginia College Building Authority (VCBA)). Proceeds of the bonds, scheduled to price on March 6, will be used to refund certain outstanding maturities of prior series of the Authority's Educational Facilities Revenue bonds. The Public Higher Education Program is one of two main VCBA debt financing programs.

SUMMARY RATING RATIONALE

The rating reflects Virginia's long history of conservative fiscal practices, an economy that has slowed significantly but still fares better than the nation and a strongly managed debt structure. The commonwealth is currently enjoying strong revenue growth and a structurally balanced budget for fiscal 2012 and is starting to rebuild reserves. Going forward, strong fiscal management and conservative revenue forecasting will continue to benefit the state, and as tax collections improve, the rainy day fund will increase significantly. The outlook is negative due to its indirect linkages to the weakened credit profile of the U.S. government.

STRENGTHS

- The commonwealth's long standing history of conservative fiscal management

- A diverse local economy that has slowed significantly but still fares better than the nation

- The commonwealth's low but growing debt burden that is controlled through a debt affordability model

CHALLENGES

- Managing the ongoing effects of the sluggish economic recovery on the state's finances, particularly with reduced reserve levels

- Controlling spending pressures from education and transportation needs within the context of more limited resources

- Risk of non-appropriation

- The state economy's direct linkages to the U.S. government

Outlook

Moody's negative outlook on the Commonwealth of Virginia's Aaa rating, and therefore this appropriation-backed credit, is due to its indirect linkages to the weakened credit profile of the U.S. government. The negative outlook relates to Moody's August 2 decision to confirm the Aaa government bond rating of the United States and assign a negative outlook, and to our December 7 assessment of the commonwealth's exposure to indirect linkages to the federal government. Moody's has determined that issuers with indirect linkages, such as Virginia, have some combination of economies that are highly dependent on federal employment and spending, a significant healthcare presence in their economies, have direct healthcare operations, or high levels of short-term and puttable debt. Please see the special comment from December 7, 2011 entitled "Most Aaa-Rated State and Local Governments Revert to Stable Outlooks, Despite Negative Pressure on U.S. Government Rating" for more information.

WHAT COULD MAKE THE RATING GO DOWN

- Deterioration in the commonwealth's financial position

- Drawing down of the commonwealth's reserves to inadequate levels

- Failure to adhere to the commonwealth's tradition of conservative fiscal management

- Non-appropriation of needed funds

- Downgrade of the U.S. government

The principal methodology used in this rating was The Fundamentals of Credit Analysis for Lease-Backed Municipal Obligations published in October 2004. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

Although this credit rating has been issued in a non-EU country which has not been recognized as endorsable at this date, this credit rating is deemed "EU qualified by extension" and may still be used by financial institutions for regulatory purposes until 30 April 2012. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Information sources used to prepare the rating are the following: parties involved in the ratings, parties not involved in the ratings, public information, confidential and proprietary Moody's Investors Service's information, and confidential and proprietary Moody's Analytics' information.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.

Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Lisa Heller
Vice President - Senior Analyst
Public Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Julius Vizner
Asst Vice President - Analyst
Public Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

MOODY'S ASSIGNS Aa1 RATING TO $160.7 MILLION OF VIRGINIA EDUCATIONAL FACILITIES REVENUE BONDS, ISSUED THROUGH VCBA
No Related Data.

 

© 2013 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

 


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