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Maine Governmental Facilities Authority -- Moody's assigns Aa3 to Maine's Series 2021A&B Lease Rental Revenue Bonds; outlook stable

·13 min read

Rating Action: Moody's assigns Aa3 to Maine's Series 2021A&B Lease Rental Revenue Bonds; outlook stable

Global Credit Research - 06 Jan 2021

New York, January 06, 2021 -- Moody's Investors Service has assigned Aa3 ratings to the State of Maine's $14.5 million Lease Rental Revenue Bonds, Series 2021A and $20.6 million Lease Rental Revenue Refunding Bonds, Series 2021B (Federally Taxable), to be issued by the Maine Governmental Facilities Authority (MGFA). The outlook is stable.

RATINGS RATIONALE

The Aa3 rating on the lease rental revenue bonds reflects the obligation of the State of Maine to make payments from funds appropriated by the legislature. The one-notch distinction in the rating from the state's Aa2 general obligation rating incorporates the essential nature of the projects financed by the bonds and the moderately strong legal structure, including the risk of non-appropriation.

RATING OUTLOOK

The lease rental revenue bonds carry the stable outlook of the State of Maine. Maine's stable outlook is based on a strong financial position and adherence to governance best practices that will help the state address budgetary imbalance that may result from continued uncertainties stemming from the coronavirus.

FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS

- An upgrade of the State of Maine's general obligation rating

FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS

- A downgrade of the State of Maine's general obligation rating

- Non-appropriation of needed funds for debt service

LEGAL SECURITY

The MGFA lease rental revenue bonds are issued under a master lease with security derived from rental obligations subject to legislative appropriation. The state's obligation to make lease payments is absolute and unconditional, regardless of whether or not the lessee possesses or uses the leased premises. Pursuant to the lease agreement, the state agrees to seek appropriation in the budget process sufficient to make full and timely lease rental payments. In the event of non-appropriation, the authority may elect to terminate the lease. However, the authority and bondholders have no lien on project facilities and have no right or interest in the properties financed. The state is responsible for operating and maintenance costs of the facilities. The supplemental bond resolution has no provision for a debt service reserve fund, but debt service payment dates in October and April are sufficiently distant from the beginning of the fiscal year (July 1) that late budget passage is unlikely to threaten timely lease rental payments.

USE OF PROCEEDS

Proceeds from the Series 2021A lease rental revenue bonds will be used to finance the renovation and construction of various state-owned buildings. Proceeds from the Series 2021B bonds will be used to advance refund certain outstanding lease rental revenue bonds for estimated net present value savings of $1.9 million, or 9.6% of the refunded bonds.

PROFILE

The State of Maine is the 42nd largest state by population (1.3 million people in 2019) and the 43rd largest state by GDP ($67.7 billion in 2019 current dollars). The state's per capita personal income is below average at 89.6% of the US level.

MGFA was created in 1997 to assist with financing the acquisition, construction, improvement, reconstruction and equipping of additions to governmental facilities. The authority is governed by five members including the State Treasurer, the Commissioner of Administrative and Financial Services, and three members appointed by the governor.

METHODOLOGY

The principal methodology used in these ratings was Lease, Appropriation, Moral Obligation and Comparable Debt of US State and Local Governments published in July 2018 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBM_1102364. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Pisei Chea Lead Analyst State Ratings Moody's Investors Service, Inc. 7 World Trade Center 250 Greenwich Street New York 10007 US JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Emily Raimes Additional Contact State Ratings JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Releasing Office: Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653

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