Fitch Rates Alaska HFC SCPBs II 2015 Series A ‘AA+’; Outlook Stable

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings assigns an 'AA+' long-term rating to the following Alaska Housing Finance Corporation (AHFC) bonds:

--$108.7 million state capital project bonds (SCPBs) II, 2015 series A.

Additionally, Fitch affirms approximately $1.1 billion in bonds backed by AHFC's general obligation (GO) pledge (see full list below).

The Rating Outlook for all the bonds is Stable.

SECURITY

The bonds are general obligations of the AHFC for which its full faith and credit is pledged.

KEY RATING DRIVERS

STRONG FINANCIAL POSITION: AHFC consistently maintains one of the highest financial strength profiles relative to its peers which contribute to its 'AA+' GO rating. The corporation's sizable asset base allows it to maintain its credit strength despite five years of net operating losses.

SUCCESSFUL MANAGEMENT PERSONNEL: AHFC has well-tenured, competent management staff that continues to demonstrate the financial flexibility to address market challenges.

GEOGRAPHIC CONCENTRATION: A high portion of AHFC's loan portfolio, which provides security for other bonds that also have GO backing, is located in and around the city of Anchorage (50%).

STRONG GO UNDERLYING ASSETS: The aggregate underlying mortgage portfolio of the corporation has performed adequately and has a delinquency rate of only 1.90% (60+ days) as of December 2014, which is lower than state and national averages.

RATING SENSITIVITIES

INCREASED STATE TRANSFERS: Under current legislative policies, transfers from AHFC to the state of Alaska are annually capped at the lesser of $103 million or 75% of change in net assets. Changes to this policy that could increase AHFC's exposure to potentially higher transfers could put negative pressure on the corporation's GO rating.

CREDIT PROFILE

The 2015 series A bonds are the ninth series of bonds to be issued under the SCPB II Indenture and have a final maturity date of 2030. The bond proceeds will be used to refund prior obligations. No mortgage loans are pledged to the bonds, as the GO of the corporation is the sole security for the bonds. Therefore, the 'AA+' rating on the bonds reflects the rating on AHFC's GO debt pledge.

AHFC continues to illustrate its strong financial position despite net losses for the last five years. The corporation has continuously maintained strong leverage and profitability ratios. As of FY 2014, the corporation had a debt-to-equity ratio (DTE) of 1.6x and a net interest spread (NIS) of 36.2%. Both ratios are better than the DTE and NIS five-year medians for all 51 State Housing Finance Agencies (SHFAs) which were 4.5x and 25.6%, respectively. The corporation's financial ratios can be attributed to its strong loan portfolio, sizeable equity base, and successful managerial oversight.

A credit concern going forward is the corporation's relationship with the state of Alaska and the state's expected transfers from AHFC. However, a statutory change, effective in fiscal 2003, caps AHFC's annual transfers to the state at the lesser amount of $103 million or 75% of a change in net assets. While this policy mitigates current concerns over transfers to the state, any changes to this policy that could increase AHFC's exposure to potential higher transfers would put negative pressure on the corporation's GO rating.

An additional credit concern is the geographic concentration in AHFC's loan portfolio. Anchorage and its suburb, Wasilla/Palmer, account for approximately 50% of the corporation's loan portfolio and should a natural disaster occur in this area it would affect a majority of the loan portfolio, which could put negative pressure on the GO rating. This risk is mitigated by the presence of insurance and AHFC's financial position. Additionally, Alaska's real estate market is vulnerable to the state's cyclical oil-driven economy and thus will be monitored closely.

Fitch affirms the 'AA+' rating on the following AHFC bonds:

--$14.6 million (Univ. of Alaska) Governmental Purpose bonds 1997 series A;

--$0.1 millionHousing Development bonds, series 2004 A & B;

--$120.3 million General Housing Purpose bonds, 2005 series B, & C;

--$48.3 millionState Capital Project bonds, 2002 series C;

--$88.6 millionState Capital Project bonds, 2006 series A;

--$74.3 millionState Capital Project bonds, 2007 series A & B;

--$77 millionState Capital Project bonds, 2011 series A;

--$89.3 millionState Capital Project bonds II, 2012 series A;

--$136.8 millionState Capital Project bonds II, 2013 series A & B;

--$342.5 millionState Capital Project bonds II 2014 series A, B, C & D;

--$132.8 million General Mortgage Revenue bonds II, 2012 series A.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'State Housing Finance Agencies General Obligation Rating Criteria' (Feb. 27, 2014);

--'Revenue-Supported Rating Criteria' (June 16, 2014).

Applicable Criteria and Related Research:

State Housing Finance Agencies General Obligation Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=736598

Revenue-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=750012

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=976375

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Fitch Ratings

Primary Analyst

Charles Giordano
Senior Director

+1-212-908-0607

Fitch Ratings, Inc.

33 Whitehall Street

New York, NY 10004

or

Secondary Analyst

Ryan Pami
Analyst

+1-212-908-0803

or

Committee Chairperson

Maura McGuigan
Senior Director

+1-212-908-0591

or

Media Relations

Elizabeth Fogerty, New York, +1-212-908-0526

[email protected]

Source: Fitch Ratings