Fitch Rates TPFA's Texas Facilities Commercial Lease Rev CP 'F1+

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has assigned a 'F1+' Short-Term rating on the following Texas Public Finance Authority (TPFA) State of Texas commercial paper (CP) notes:

--Lease revenue CP notes (Texas Facilities Commission projects), series A (taxable);

--Lease revenue CP notes (Texas Facilities Commission projects), series B (tax-exempt).

The lease revenue CP notes are scheduled to be offered by negotiation on or about June 1, 2016.

In addition, Fitch has affirmed the Short-Term 'F1+' ratings on the following outstanding TPFA CP notes:

--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 lease revenue CP notes are payable from lease payments of the state, subject to biennial appropriations. Additionally, under the series liquidity agreement, 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 'AAA' ISSUER DEFAULT RATING: The state's long-term credit quality is reflected in its 'AAA' Long-Term Issuer Default Rating (IDR), which is based on an economy that continues to grow despite the severe contraction in the state's globally important energy sector, and its conservative financial operations and manageable liability burden.

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. 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.

The Texas Facilities Commission lease revenue CP note program was authorized by Texas' Legislature in 2015, and will join a relatively limited number of existing CP and variable rate programs that benefit from standby liquidity agreements with the Comptroller. The liquidity agreement for the new program limits the maximum outstanding notes to $25 million during fiscal 2016 and $75 million during fiscal 2017. Total authorized by the Legislature under the new program is almost $768 million.

As of March 31, 2016, the state had total liquidity commitments of $841 million, with a maximum daily commitment of $481 million. The Treasurer's commitment includes interest at the maximum rate, or up to 15%, for periods as specified in each agreement; for the CP programs, this period is 270 days. A total of $301 million was outstanding under all of the programs.

The market value of the treasury portfolio was $25.9 billion as of March 31, 2016. Portfolio assets are invested conservatively, with nearly $2 billion in cash, repos and bank deposits, another $3.4 billion in U.S. treasury securities and $7.7 billion in CP notes. The weighted average maturity of the treasury portfolio was 1.4 years.

Coverage of liquidity commitments by treasury fund assets remains ample. As of March 31, 2016, treasury fund assets would cover the maximum liquidity commitment under existing programs by 30.8x, and the maximum daily commitment would be covered 53.9x. Coverage remains ample even after applying varying discounts to assets classes with less liquidity, as per Fitch's criteria.

Texas' Long-Term 'AAA' IDR reflects an economy that continues to grow despite the severe contraction in the state's globally important energy sector, its conservative financial operations and manageable liability burden. The oil price plunge that began in late 2014 interrupted a long period of economic and revenue growth, but diversification over time has left the state better positioned relative to past cycles to weather the energy sector downturn.

For additional information on the 'AAA' Long-Term IDR of the State of Texas, please see Fitch's press release dated April 28, 2016, 'Fitch Rates Texas Public Finance Auth's $187M GO Bonds 'AAA'; Outlook Stable,' which is available at 'www.fitchratings.com'.

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

Applicable Criteria

Rating U.S. Public Finance Short-Term Debt (pub. 17 Nov 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=873508

U.S. Tax-Supported Rating Criteria (pub. 18 Apr 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=879478

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1003998

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1003998

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/20160504006828/en/

Fitch Ratings
Primary Analyst
Douglas Offerman
Senior Director
+1-212-908-0889
Fitch Ratings, Inc.
33 Whitehall Street
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:
Elizabeth Fogerty, New York, +1 212-908-0526
Email: [email protected]

Source: Fitch Ratings

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