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TMCNet:  Fitch Affirms Utah School Bond Default Avoidance Program at 'AAA'; Outlook Stable

[July 14, 2014]

Fitch Affirms Utah School Bond Default Avoidance Program at 'AAA'; Outlook Stable

NEW YORK --(Business Wire)--

Fitch Ratings has affirmed the 'AAA' rating on the Utah School Bond Default Avoidance Program.

SECURITY

State guaranty - full faith and credit obligation of the state of Utah, on par with the state's general obligation (GO) bonds.

KEY RATING DRIVERS

FULL FAITH AND CREDIT PLEDGE: The state's guaranty pledge on qualifying school debt is a full faith and credit obligation, on par with that of its own GO bonds. As a result, bonds qualifying for the program receive an 'AAA' rating, equivalent to the state's GO bonds.

SOUND PROGRAM MECHANICS: Program mechanics allow sufficient time for state funds to be made available to pay debt service by the debt service payment date.

ABILITY TO ISSUE STATE GO BONDS: If insufficient funds are on hand, the state may issue GO bonds to meet its obligations under the guaranty.

RATING SENSITIVITIES

The rating is sensitive to changes in the state's GO rating, to which it is linked.

CREDIT PROFILE

Fitch will assign an 'AAA' rating to Utah school district GO bonds qualifying for participation in the School Bond Default Avoidance Program. The rating is based on the state's full faith and credit guarantee provided as credit enhancement on qualifying school district GO bonds. The state will use cash on hand or issue short-term GO notes to meet a defaulting district's debt service obligation. Following a payment by the state, the state treasurer is required to immediately intercept any operating moneys distributed to the district by the state to reimburse the state until all obligations of the school district are paid in full. The state pledges that it will not alter, impair, or limit the rights vested by the program to the bonds until the bonds are fully paid and discharged, unless provision is made by law for protection of bondholders.

Program mechanics allow sufficient time for state funds to be made available to pay debt service by the debt service payment date. Moneys for debt service are to be remitted by a school district's business administrator to the paying agent at least 15 days prior to the debt service payment date. Should a district be unable to meet its payment obligation at that time, the business administrator must immediately notify the paying agent and state treasurer by telephone and in writing by either fax or U.S. mail. If sufficient moneys have not been received at least 10 days prior to the payment date, te paying agent must immediately notify the state treasurer by telephone and in writing by either fax or U.S. mail. The state treasurer will then transfer to the paying agent, on or before the payment date, sufficient moneys to make the debt service payment.

As of fiscal year (FY) 2014, the state had guaranteed 280 bond issues for 39 of the state's 41 school districts, for an aggregate principal outstanding of $2.75 billion. Since the program's inception in 1997, the state has never been called upon to pay debt service on any bonds guaranteed under the program.

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

Applicable Criteria and Related Research:

--'Tax-Supported Rating Criteria', dated Aug. 14, 2012;

--'U.S. State Government Tax-Supported Rating Criteria', dated Aug. 14, 2012.

--'Rating Guidelines for State Credit Enhancement Programs', dated April 18, 2013.

Applicable Criteria and Related Research:

Tax-Supported Rating Criteria

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

Rating Guidelines for State Credit Enhancement Programs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=704880

U.S. State Government Tax-Supported Rating Criteria

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

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=839442

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 (News - Alert) 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.


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