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Rating Action:

Moody's assigns Aa3 underlying and Aa2 enhanced (MSDE) to St. Cloud ISD 742, MN's $37.7M GO Bonds, Ser. 2015A

25 Feb 2015

Maintains Aa3 on outstanding GO debt; A1 on outstanding COPS

New York, February 25, 2015 --

Moody's Rating

Issue: General Obligation Alternative Facilities Bonds, Series 2015A; Underlying Rating: Aa3; Enhanced Rating: Aa2; Sale Amount: $37,715,000; Expected Sale Date: 03/09/2015; Rating Description: General Obligation

Opinion

Moody's Investors Service has assigned a Aa3 underlying rating and Aa2 enhanced rating to St. Cloud Independent School District 742, MN's $37.7 million General Obligation (GO) Alternative Facilities Bonds, Series 2015A. Concurrently, Moody's maintains the Aa3 on the district's outstanding GO and the A1 rating on the district's outstanding certificates of participation (COPS) debt. Post-sale, the district will have $14.9 million in COPS outstanding and $62.1 million of GO debt outstanding.

SUMMARY RATING RATIONALE

The Aa3 underlying rating reflects the district's healthy reserves, improved liquidity, and sizeable tax base buoyed by some institutional presence. The rating also incorporates the district's currently modest debt burden and plans to issue a sizeable amount of additional debt over the next few years.

The Aa2 enhanced rating is due to the additional security provided by the State of Minnesota's School District Credit Enhancement Program (MSDE). The program, established and designed by the State of Minnesota (Aa1/stable), secures qualifying bonds with the state's pledge of an unlimited appropriation from its General Fund, should the district be unable to meet debt service requirements.

OUTLOOK

Outlooks are usually not assigned to local government credits with this amount of debt outstanding.

WHAT COULD MAKE THE RATING GO UP (UNDERLYING RATING)

-Continued growth in General Fund reserves and liquidity

-Improvement in resident income indices

WHAT COULD MAKE THE RATING GO DOWN (UNDERLYING RATING)

-Sizeable increases to the district's debt burden above current expectations

-Reduction in reserves and liquidity

WHAT COULD MAKE THE RATING GO UP (ENHANCED RATING)

- Upward movement in the state of Minnesota's general obligation rating

WHAT COULD MAKE THE RATING GO DOWN (ENHANCED RATING)

- Downward movement in the state of Minnesota's general obligation rating

- Weakening of MSDE program mechanics

OBLIGOR PROFILE

St. Cloud ISD 742 is headquartered in the City of St. Cloud (Aa2) and serves an area of 240 square miles and a population of approximately 96,000.

LEGAL SECURITY

Debt service on the bonds is secured by the district's general obligation unlimited tax (GOULT) pledge, which is secured by a dedicated property tax levy not limited by rate or amount. The bonds are additionally secured by the State of Minnesota's School District Credit Enhancement Program (MSDE) which provides for an unlimited advance from the state's General Fund should the district be unable to meet debt service requirements.

USE OF PROCEEDS

Proceeds from the Bonds will be used to fund a portion of the costs of the following projects, as included in the District's ten-year facility plan approved by the Board and the Commissioner of Education, and related financing costs: replacement of windows, replacement of mechanical air handling systems, roof repair and replacement, pavement repair, plumbing repairs, tuck pointing and miscellaneous deferred maintenance projects at various District facilities.

RATING METHODOLOGIES

The principal methodology used in the underlying rating was US Local Government General Obligation Debt published in January 2014. The principal methodology used in the enhanced rating was State Aid Intercept Programs and Financings: Pre and Post Default published in July 2013. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain 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 certain 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 certain 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.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

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.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Kevin Robert Archer
Associate Analyst
Public Finance Group
Moody's Investors Service, Inc.
100 N Riverside Plaza
Suite 2220
Chicago, IL 60606
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Genevieve Nolan
Vice President - Senior Analyst
Public Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
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JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's assigns Aa3 underlying and Aa2 enhanced (MSDE) to St. Cloud ISD 742, MN's $37.7M GO Bonds, Ser. 2015A
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