CHICAGO - (Business Wire) Fitch Ratings assigns an 'AAA' rating to the following New Jersey Environmental Infrastructure Trust's (NJEIT) environmental infrastructure bonds: --$87,340,000 environmental infrastructure bonds, series 2009A;
--$3,511,000 environmental infrastructure bonds, series 2009B;
--$7,825,000 environmental infrastructure bonds, series 2009C (taxable).
The bonds are scheduled to sell competitively on Nov. 18, 2009. Bond proceeds will be used to fund loans to eligible public and private borrowers throughout New Jersey. In addition, Fitch affirms the 'AAA' rating on the NJEIT's approximately $1.2 billion of outstanding environmental infrastructure and wastewater treatment bonds. The Rating Outlook is Stable.
The 'AAA' rating on the bonds is based on significant loan pool diversification, high collateralization levels, and the overall credit quality of the drinking water state revolving fund (DWSRF) and the clean water state revolving fund (CWSRF) loan pools. The master trust loan pool consists of 285 borrowers, with Rahway Valley Sewage Authority representing the largest borrower at 6% of total outstanding loan repayments. Approximately 90% of loans are estimated to exhibit investment-grade characteristics, and over 90% of outstanding loans are secured by general obligation or net system revenue pledges.
Annual cash flow coverage from repayments of pledged loans, which are funded from bonds and state revolving fund (SRF) capitalization moneys, remains strong - exceeding 1.79 times (x) annually. In addition, excess loan repayments on each bond payment date are held through the next two bond payment dates as extra protection.
The excess cash flows allow for continued bond payments even in scenarios where 46.4% of loans default for the first four years, without recoveries or use of debt service reserve funds that total $86.1 million presently. This default tolerance exceeds what Fitch would expect for a pool of this credit quality, size and diversification in an 'AAA' stress scenario.
With this issue, approximately 3% of outstanding loans are made to private and investor-owned utilities through New Jersey's DWSRF. These utilities generally have greater credit risks than those of traditional municipal SRF borrowers, but most lending should continue to be to creditworthy systems with established local franchises and state regulatory oversight.
Additional information is available at 'www.fitchratings.com'.
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Fitch Ratings
Adrienne M. Booker, 312-368-5471, Chicago
David Litvack, 212-908-0593, New York
or
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Email: cindy.stoller@fitchratings.com
