APPROXIMATELY $960 MILLION IN SIMILAR DEBT OUTSTANDING
New York, October 05, 2011 -- Moody's Rating
Issue: First Mortgage Refunding Revenue Bonds (Judicial Center Project),
Series 2011; Rating: Aa3; Sale Amount: $4,365,000;
Expected Sale Date: 10/10/2011; Rating Description: Lease
Rental
Opinion
Moody's Investors Service has assigned a Aa3 rating with a negative outlook
to $4.365 million Casey County Public Properties Corporation
First Mortgage Refunding Revenue Bonds (Judicial Center Project),
Series 2011.
SUMMARY RATINGS RATIONALE
The rating is based on the credit quality of the Commonwealth of Kentucky
(issuer rating of Aa2, with a negative outlook), the subject-to-appropriation
nature of the payments supporting the bonds, and the commonwealth's
significant reliance on appropriation-backed financings to fund
capital investments. Proceeds of the Series 2011 bonds will be
used to refund prior bonds for debt service savings.
Kentucky retired the last of its outstanding general obligation bonds
in 1995. Kentucky issues debt indirectly by entering into lease
financing agreements with various state agencies. The issuer rating
represents the commonwealth's implicit general obligation rating and reflects
a record of financial control, including close monitoring of revenues
and proactive responses to lowered revenue estimates. This strength
is offset by low per-capita income levels, above-average
debt levels and low pension funded levels. In addition, Kentucky's
economy remains dependent on a weakened manufacturing sector, although
it has diversified in recent years.
Kentucky's negative outlook reflects significant fiscal stress related
to the economic downturn, a large and growing unfunded pension liability
and a trend of reliance on non-recurring budget balancing measures,
including debt restructuring for near-term savings and authorized
issuance of debt to cover teacher retiree health insurance costs.
Despite pension reform measures over the past few years, an approved
employer contribution schedule of less than the actuarially required amount
projects growth in the liability for another 14-15 years.
Pension funding levels are not expected to improve in the near term,
and the economy remains vulnerable due to a heavy dependence on manufacturing.
Further, the enacted budget for the fiscal 2011-2012 biennium
relies on a number of one-time measures, together with some
expenditure cuts, and projected revenue growth for balance.
The ability of the commonwealth to meet expected expenditure reduction,
budget balance and revenue growth targets, without the need for
additional reliance non-recurring measures, will be a key
near-term credit consideration.
Credit strengths are:
Commonwealth's reliance on appropriation-backed debt
Signs of revenue stabilization
History of active financial control
Credit challenges are:
Revenue weakness due to economic downturn
Dependence on weakened manufacturing sector, particularly auto manufacturing
Low per-capita income
Above-average debt ratios
Weak pension system funding
Trend of borrowing to satisfy current costs for teacher retiree health
benefits
History of late budget adoption, although recent budgets have been
timely
Outlook
Kentucky's credit outlook is negative. The commonwealth's economic
and financial weakening has led to sizable budget deficits, which
the commonwealth has dealt with largely through the use of one-time
resources, including a draw-down of reserve balances and
borrowing for budget relief. Kentucky faces ongoing budget pressure
over the biennium as it seeks to stabilize its finances. The commonwealth's
pension liability will also continue to grow in the near to medium term.
The commonwealth has a history of active financial management that has
enabled it to address fiscal instability. The commonwealth's continuing
ability to maintain fiscal stability by meeting planned expenditure,
revenue, and debt targets without additional reliance on one-time
resources is a key credit consideration. As the economic recovery
takes hold, it will be important for the commonwealth to wean itself
of non-recurring budgetary solutions and to rebuild reserves to
maintain financial flexibility.
What could change the rating - UP:
Sustained economic and revenue growth, with structural balance in
state finances and limited reliance on non-recurring resources
Build-up and maintenance of reserves.
What could change the rating - DOWN:
Continued economic slowing, even after a national upturn,
resulting in weaker revenue performance that strains commonwealth finances
Depletion of reserves with no replenishment in step with other comparably
rated states
Trend of ongoing reliance on non-recurring resources, particularly
use of additional deficit financing, to balance the commonwealth's
budget
Trend of negative GAAP basis ending balances
Indications of strained liquidity
Failure to address declining pension system funded levels
Failure of the commonwealth to pass a timely budget, leading to
an extended shutdown of state government, even if debt service continues
to be paid
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
The Global Scale Credit Ratings on this press release that are issued
by one of Moody's affiliates outside the EU are considered EU Qualified
by Extension and therefore available for regulatory use in the EU.
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, public information, confidential
and proprietary Moody's Investors Service's information, 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 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
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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
Nicole Johnson
Senior Vice President
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 Aa3 RATING AND NEGATIVE OUTLOOK TO $4.365 MILLION CASEY COUNTY PUBLIC PROPERTIES CORPORATION FIRST MORTGAGE REFUNDING REVENUE BONDS (JUDICIAL CENTER PROJECT), SERIES 2011
