Rating Action: Moody's assigns MIG 1 to Colorado's 2020 GTRANs
Global Credit Research - 21 Jul 2020
New York, July 21, 2020 -- Moody's Investors Service has assigned a MIG 1 rating to the State of Colorado's $600 million General Fund Tax and Revenue Anticipation Notes, Series 2020 (GTRANs).
RATINGS RATIONALE
The MIG 1 rating on the GTRANs is based on the State of Colorado's long-term credit quality (Issuer Rating Aa1 stable), ample liquidity in the state's general fund cash flows although general fund liquidity is projected to be narrower than in recent years, and substantial available borrowable resources in funds outside the general fund. Projected available cash at the end of fiscal 2021 including an ending general fund cash balance prior to GTRAN principal repayment of $1,076.0 million and borrowable resources of $4,019.5 million, provide an extremely strong 8.5 times coverage of note principal of $600 million. An additional factor is the state's track record of accurate cash flow projections.
We regard the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety. The coronavirus crisis is not a key driver for this rating action. We do not see any material immediate credit risks for the State of Colorado. However, the situation surrounding coronavirus is rapidly evolving and the longer term impact will depend on both the severity and duration of the crisis. If our view of the credit quality of the state changes, we will update the rating and/or outlook at that time.
RATING OUTLOOK
No outlook for short term ratings.
FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATING
- A rapid and unanticipated deterioration of the state's liquidity and long-term credit quality.
LEGAL SECURITY
The GTRANs are payable from and secured by a pledge of anticipated fiscal 2021 general fund revenues, and, if necessary, proceeds of inter-fund borrowings from other state funds. The notes do not constitute a general obligation or indebtedness of the state. The borrowable funds include 16 major funds and about 600 smaller funds. State highway funds, the state education fund, and certain others are not available for interfund borrowing, and are not included in the available balance projections. (These funds do, however, provide liquidity for the state's separately-secured Education Loan Program Tax and Revenue Anticipation Notes (ETRANs), which are issued to provide cash flow loans to school districts.)
The note payment account is held by the payng agent and may not be used for the payment of general fund expenditures or interfund transfers. The Treasurer has covenanted to deposit pledged revenues in the note payment account on June 15, 2021 in an amount sufficient to pay principal and interest due at note maturity, June 25, 2021.
Additional notes may be issued for the fiscal year subject to constitutional limits on general fund borrowing, but must mature on the same date as the notes and be payable on a parity basis with the notes. No additional notes are anticipated or have been issued in recent years.
USE OF PROCEEDS
The Series 2020 GTRANs are being issued to fund temporary cash flow imbalances in the state's general fund during the 2021 fiscal year.
PROFILE
Colorado is the 21st largest state by population, at 5.8 million. Its state gross domestic product, $390.3 billion, is the 16th largest. Income levels are above average--the state's per capita personal income is equal to 108.3% of the US level and its poverty level is among the lowest in the nation.
METHODOLOGY
The principal methodology used in this rating was Short-term Debt of US States, Municipalities and Nonprofits Methodology published in July 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBM_1210749. 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 rating has been disclosed to the rated entity or its designated agent (s) and issued with no amendment resulting from that disclosure.
This rating is 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_1133569.
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.
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.
Kenneth Kurtz Lead Analyst State Ratings Moody's Investors Service, Inc. One Front Street Suite 1900 San Francisco 94111 US JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Marcia Van Wagner 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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