Texas Notes Receive Highest Wall Street Ratings
(AUSTIN) — Wall Street bond raters have given their highest possible ratings to $9.8 billion in one-year cash flow notes Texas will sell to support payments to public schools at the beginning of the new school year.
Texas’ 2011A Series Tax and Revenue Anticipation Notes (TRANs), to be sold on Aug. 23, are rated SP-1+ by Standard & Poor’s, MIG 1 by Moody’s Investors Service and F1+ by Fitch Inc.
“These ratings reflect confidence in Texas’ economic resilience and conservative fiscal management,” said Texas Comptroller Susan Combs. “Texas has outperformed the nation as both economies recover from the recession. The state has regained 88 percent of the jobs that were lost during the recession, while the nation has recovered 22 percent. However, we will also continue to monitor factors such as the housing market where new home construction and existing home sales remain slow.”
Moody’s Investors Service noted the Comptroller’s strong plan to ensure that money is set aside to repay the TRANs and strong cash management procedures. “Noteholders benefit from strong legal provisions outlined in the governing comptroller’s note order, and the comptroller’s strong statutory treasury management powers.”
In awarding its highest rating, Fitch analysts commented on the state’s history of conservative economic and revenue assumptions. “The fiscal 2012 forecast reflects slowly accelerating economic growth as the state emerges from recession.” Fitch also noted the state’s low debt burden, conservative financial operations and growth oriented economy.
Standard & Poor’s commented, “The State Comptroller’s cash flow projections for fiscal 2012 are based on an anticipated gradual recovery in the state’s economy. The comptroller’s forecast anticipates continued growth in the state’s real gross state product of 3 percent in 2012, and personal income growth of approximately 4.2 percent in 2012.”
Since 1987, Texas has used short-term TRAN notes to fund public schools and meet other cash flow needs between the Sept. 1 start of the fiscal year and the arrival of tax revenues later in the year.
The TRAN sale will take place Tuesday, Aug. 23, from 9–10 a.m. CDT at www.trantexas.com. The notes will be repaid on Aug. 31, 2012.