The State of Wisconsin's approximately $70 million clean water revenue refunding bonds, 2002 series 2, are rated 'AA+' by Fitch Ratings. The bonds are scheduled to sell on July 30 on a negotiated basis through a syndicate led by Morgan Stanley. Fitch also affirms the 'AA+' rating on the state's $657.4 million of outstanding clean water revenue bonds. The Rating Outlook is Stable. The 'AA+' rating reflects the bonds' strong tolerance to borrower defaults, Wisconsin's substantial financial commitment to the clean water fund program (CWFP), and the requirement to maintain a reserve fund at levels sufficient to preserve current ratings.
On April 8, 2002, Fitch assigned an 'AA+' rating to the States $100 million clean water revenue bonds, 2002 series 1, which sold in May 2002. (For more information see Fitch Research on 'State of Wisconsin' dated April 18, 2002) At that time, approximately 55% of loans with estimated credit quality below the 'AA' category could default for four years without causing a bond default. Four-year default tolerance for all loans and state payments totaled 39%, well above the 13% level required by Fitch's 'AA' stress test for a loan portfolio with such a credit distribution. Fitch believes that the strength of the program has increased since April 2002, as the proceeds from this issue will advance refund approximately $70 million in outstanding clean water revenue bonds. The state estimates that the refunding will result in present value savings of approximately $3 million in cash flow liabilities. In addition, the $12 million subsidy fund increase from state capital contributions, further strengthens the pool.