Bond Bank doesn’t think downgrade will cost NH taxpayers
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(CONCORD, NH) The financial adviser to the New Hampshire Municipal Bond Bank doesn’t think last week’s downgrade will make it more expensive for cities and towns to borrow money. Last week, Fitch Ratings announced that it was recalculating how it rates leveraged municipal loan pools, tying it to the state’s credit rating. That resulted in a AA- rating, one notch below its previous status.
Cinder McNerney is Managing Director of FirstSouthwest. She says since the downgrade came from a change in methodology, and not from any weakness in the Bond Bank itself, she does not think investors will be less willing to purchase local New Hampshire debt.
“We do not believe the new credit rating of Fitch Investors Service will result in higher costs of borrowing for the NHMBB. We’ve been using the NHMBB’s S&P (AA stable) and Moody’s (Aa3 stable, and equivalent to the new Fitch rating) ratings to market NHMBB bonds since the beginning of 2012″ McNerney says. “We think the NHMBB debt will be as desirable in the market now as it was prior to Fitch’s announcement.”
The NHMBB will issue an additional $40 million in bonds to fund local capital projects next Tuesday. It financed more than $163 million in local construction projects in Fiscal Year 2012, at interest rates ranging from 1.44% to 3.49%. Both New Hampshire General Obligation debt and municipal debt have sold at lower interest rates than the national average, reflecting investor confidence in the Granite State paying off the loans on time.
New Hampshire taxpayers are not legally liable should cities and towns default on their bond obligations, but State Treasurer Catherine Provencher does have authority to withhold state aid to ensure that bond payments are made. This intercept provision is why Fitch decided to tie NHMBB debt to the state’s AA+ bond rating last week.
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