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Rating Action:

Moody's revises Burlington, VT's outlook to stable; affirms Baa3 GO on $102.8M of debt

Global Credit Research - 14 Apr 2014

Also affirms Ba1 and Ba2 on $9M of COPs

New York, April 14, 2014 -- Moody's Investors Service has affirmed the Baa3 rating on the City of Burlington, VT's $102.8 million of outstanding general obligation bonds. Concurrently, Moody's has affirmed the Ba1 rating on $1.9 million of outstanding essential (city multi-purpose) Certificates of Participation (COPs), Series 2000, and a Ba2 rating on $7.1 million non-essential (parking) COPs, Series 1999A and 2005. The outlook on the general obligation debt and COPs has been revised to stable from negative. The bonds are secured by the city's unlimited tax pledge.

SUMMARY RATING RATIONALE

The Baa3 general obligation rating reflects the city's strained financial position given the significant advances to other funds from the General Fund prior to fiscal 2012, including a material use of reserves for the expansion of Burlington Telecom (BT). The rating also incorporates the city's strength as the economic center of Vermont (rated Aaa stable) and a manageable debt burden.

The Ba1 and Ba2 ratings on the COPs reflect the city's general credit profile while incorporating the appropriation risk of the COPs and essentiality of the projects.

The stable outlook reflects the recent stabilization of General Fund operations and management's commitment to addressing the negative unassigned fund balance in the General Fund and non major governmental funds over the near term. The outlook also incorporates the terms of a pending settlement in the BT lawsuit that, if approved by the Vermont Public Service Board (PSB), will significantly limit the General Fund's liability.

STRENGTHS

- Stable underlying economy and tax base serving as the economic center of the state

- Manageable debt profile

- Pending settlement with Citibank over telecom enterprise

CHALLENGES

- Addressing negative unassigned fund balance in the General Fund and non major governmental fund

- Finalizing the BT settlement and eventual sale of BT

- Repayment or elimination of advances to other funds from the General Fund

OUTLOOK

The stable outlook reflects the recent stabilization of General Fund operations and management's commitment to addressing the negative unassigned fund balance in the General Fund and non major governmental funds over the near term. The outlook also incorporates the terms of a pending settlement in the BT lawsuit that significantly limits the General Fund's liability.

WHAT WOULD MAKE THE RATING GO UP

- Closing of BT settlement without alteration of current terms

- Trend of General Fund operating surpluses

- Elimination of negative fund balance positions

- Plan to addressing the advances to other funds from the General Fund

WHAT WOULD MAKE THE RATING GO DOWN

- Structurally imbalanced General Fund operations, reducing the city's financial flexibility

- Inability to reduce the negative fund balance positions

- Increased exposure to losses from the city's various enterprise or other non major funds

- Inability to make progress towards repayment of the advances to other funds

The principal methodology used in the rating of the general obligation bonds was US Local Government General Obligation Debt published in January 2014. The principal methodology used in the rating of the certificates of participation was The Fundamentals of Credit Analysis for Lease-Backed Municipal Obligations published in December 2011. 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.

Nicholas Lehman
Analyst
Public Finance Group
Moody's Investors Service, Inc.
60 State Street
Suite 700
Boston, MA 02109
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Malcolm Thompson
VP - Senior Credit Officer
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 revises Burlington, VT's outlook to stable; affirms Baa3 GO on $102.8M of debt
No Related Data.
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