Credit Analysis Michael Borgani Director Fitch Ratings Date
Credit Analysis Michael Borgani, Director Fitch Ratings Date: April 24, 2006
Credit Ratings—Terminology Click to. The edit. Rating Master. Process—Methodology title style Summary www. fitchratings. com 2/10/2022 1
What is a rating? > Notation summarizing the likelihood of a repayment for a specific debt obligation > Letter Category: AAA, A, BBB, …. > “+” and “-” specify placement with the category: AA+, AA-, A+, … > Band of credit quality www. fitchratings. com 2/10/2022 2
A Rating Is NOT… > A judgment or statement regarding any aspect of public policy > A political statement in favor of or against a particular person or administration > A dictate of what should be done or how a matter should be handled www. fitchratings. com 2/10/2022 3
To Rate Or Not To Rate > Increase investor acceptance > Current economic environment > Current capital market environment > BOTTOME LINE: Lower interest cost! www. fitchratings. com 2/10/2022 4
The Rating Process www. fitchratings. com 2/10/2022 5
Overview > The Beginning: Decision and documents > The Middle: Let’s Talk > The End: Rating committee, communication, and dissemination > Appeal process, if necessary www. fitchratings. com 2/10/2022 6
Other Rating Agency Products (at least at Fitch) > “Look See” > Credit Assessment www. fitchratings. com 2/10/2022 7
Elements of Tax-supported Credit > Debt and Capital Plan > Economic Factors > Financial Factors > Management www. fitchratings. com 2/10/2022 8
Management, Management! > Importance revealed through Fitch’s default study > Written, adopted policies > Policy monitoring, implementation www. fitchratings. com 2/10/2022 9
Management Best Practices--Debt > Affordability guidelines > Pay-as-you-go practices > Amortization considerations > Multi-year CIP > Operating cost considered > Contingency Planning www. fitchratings. com 2/10/2022 10
Management Practices--Finance > Fund balance/reserve goals > Multi-year forecasting > Mid-year monitoring and budget adjustment > Use of non-recurring revenue > Contingency planning www. fitchratings. com 2/10/2022 11
Management Best Practices—Also Think About > Taxpayer/voter communication > Labor relations > Intergovernmental relations/cooperation > Public/private partnerships www. fitchratings. com 2/10/2022 12
Additional Credit Elements for Lease Financings > When a bond is not debt? > Project essentiality > Legal structure—Covenant to budget and appropriate > Construction and completion risk > Abatement > Evidence of support > Reliance on lease financing www. fitchratings. com 2/10/2022 13
Rating Tips > Tip #1: Timing is everything (well, almost) > Tip #2: Honesty is the best policy > Tip#3: Seek and ye shall find (ask the analyst) www. fitchratings. com 2/10/2022 14
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