Fitch Affirms Texas Public Finance Auth's CP Notes at 'F1+'

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings affirms the 'F1+' short-term rating on outstanding Texas Public Finance Authority (TPFA) general obligation (GO) commercial paper (CP) notes and CP revenue notes, including:

--GO CP notes, series 2008 (tax-exempt);

--GO CP notes (Cancer Prevention and Research Institution of Texas Project), series 2010A (taxable) and series 2010B (tax-exempt);

--Tax-exempt CP revenue notes, series 2003.

SECURITY

The GO CP notes are general obligations to which the state pledges its full faith and credit. The CP revenue notes are special obligations of TPFA payable from lease payments of the state, subject to biennial appropriation. Additionally, under individual series standby liquidity agreements, the state comptroller commits to purchase unsold notes from state cash resources.

KEY RATING DRIVERS

AMPLE LIQUIDITY FOR MATURING CP NOTES: State of Texas treasury fund assets managed by the Comptroller are sizable and more than sufficient to support the liquidity needs of maturing CP notes and other short-term securities that are not remarketed. The treasury fund is invested conservatively, with approximately two-thirds of its portfolio invested in short-term treasury, agency or other securities. Coverage of maximum potential liquidity needs is ample for CP notes and other issues whose liquidity is supported by the state.

STATE GO BONDS RATED 'AAA': The state's long-term credit quality is reflected in its 'AAA' GO bond rating, which is based on its low debt burden, conservative financial operations and an economy that continues to grow at a solid pace despite recent energy industry slowing.

RATING SENSITIVITIES

ADEQUACY OF CASH RESOURCES: The rating is sensitive to the continued adequacy of cash resources managed by the comptroller and available to support the notes' liquidity needs.

CREDIT PROFILE

The 'F1+' short-term rating is based on the liquidity support provided by the State of Texas to certain CP programs and variable-rate bonds of various state agencies. Under separate series liquidity agreements between the issuing agency and the Texas Comptroller of Public Accounts, cash resources of the state treasury fund are made available to purchase maturing notes that are not successfully remarketed.

As of Sept. 30, 2015, the state had total liquidity commitments of $889 million, with a maximum daily commitment of $529.3 million; commitments include 365 days of interest at the maximum rate. A total of $618.3 million was outstanding under all of the programs.

The market value of the treasury portfolio was $29.9 billion as of Sept. 30, 2015. Portfolio assets are invested conservatively, with $1.6 billion in cash, repos and bank deposits, and another $1.1 billion in U.S. treasury securities. Agency notes and discount notes totaled nearly $9.7 billion. The weighted average maturity of the treasury portfolio was 1.38 years.

Coverage of liquidity commitments by treasury fund assets remains ample. As of Sept. 30, 2015, treasury fund assets would cover the maximum liquidity commitment under existing programs by 33.6x, and the maximum daily commitment would be covered 56.5x. Coverage remains ample even after applying varying discounts to assets classes with less liquidity, as per Fitch's criteria.

Texas' long-term 'AAA' GO rating reflects its low debt burden, conservative financial operations and a growth-oriented economy that has outpaced national averages through most of the current expansion. The oil price plunge that began in late 2014 has slowed the state's economic and revenue momentum, although broader gains continue despite weakness in some regions and sectors. Fitch believes that the state has ample flexibility to absorb near-term economic and revenue volatility, both in the form of its very large reserve balances and a tradition of taking budgetary actions to maintain balance.

For additional information on the GO rating of the State of Texas, please see Fitch's press release dated Aug. 28, 2015, 'Fitch Rates Texas $1 Billion GO Mobility Fund Bonds 'AAA'; Outlook Stable,' which is available at 'www.fitchratings.com'.

Additional information is available at 'www.fitchratings.com'.

Fitch recently published an exposure draft of state and local government tax-supported criteria (Exposure Draft: U.S. Tax-Supported Rating Criteria, dated Sept. 10, 2015). The draft includes a number of proposed revisions to existing criteria. If applied in the proposed form, Fitch estimates the revised criteria would result in changes to fewer than 10% of existing tax-supported ratings. Fitch expects that final criteria will be approved and published by Jan. 20, 2016. Once approved, the criteria will be applied immediately to any new issue and surveillance rating review. Fitch anticipates the criteria to be applied to all ratings that fall under the criteria within a 12-month period from the final approval date.

Applicable Criteria

Exposure Draft: U.S. Tax-Supported Rating Criteria (pub. 10 Sep 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=869942

Rating U.S. Public Finance Short-Term Debt (pub. 07 Jan 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=846969

Tax-Supported Rating Criteria (pub. 14 Aug 2012)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686015

U.S. State Government Tax-Supported Rating Criteria (pub. 14 Aug 2012)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686033

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=992915

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=992915

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

View source version on businesswire.com: http://www.businesswire.com/news/home/20151027006262/en/

Fitch Ratings
Primary Analyst
Douglas Offerman
Senior Director
+1-212-908-0889
Fitch Ratings, Inc.
33 Whitehall St.
New York, NY 10004
or
Secondary Analyst
Marcy Block
Senior Director
+1-212-908-0239
or
Committee Chairperson
Karen Krop
Senior Director
+1-212-908-0661
or
Media Relations:
Sandro Scenga, +1 212-908-0278
[email protected]

Source: Fitch Ratings

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