BATON ROUGE – Today, Fitch Ratings assigned an “AA” rating, and Moody’s Investor Service assigned an “AA2” rating, to approximately $580 million in refunding of Louisiana general obligation (GO) bonds that are expected to sell next week. In addition, Fitch affirmed the state’s overall credit rating of “AA” for its outstanding GO bonds. Both agencies also described Louisiana’s rating outlook as “stable.”
Depending on the results of the sale, the assigned credit ratings mean that, by refunding the bonds at better interest rates, the state will see projected total savings of around $46 million in the coming years.
Governor Bobby Jindal said, “Today’s news shows the concrete results of our fiscal reforms that have strategically reduced the size and cost of government while setting Louisiana on a path for strong economic prosperity.”
Since the beginning of 2008, Louisiana has received six credit-rating upgrades among all three major credit-rating agencies. In the two years of 2008 and 2009, Fitch twice upgraded Louisiana’s credit rating (which was an “A” prior to that time). The upgrades marked the first time that Louisiana’s credit rating has received a rating from Fitch above the single “A” range since Fitch began rating Louisiana in 1997. In May of 2011, Standard & Poor’s raised Louisiana’s credit rating from “AA-minus” to “AA.” The upgrade gave Louisiana its first “AA” rating from S&P since 1984.
Fitch stated that Louisiana’s “financial management has been solid, and the state took prompt action to address projected shortfalls during the recent downturn.” According to Fitch, Louisiana’s “AA” rating “reflects the sound financial management demonstrated by the state since the hurricanes of 2005 and through the recent recession, including a focus on spending control and maintenance of solid reserves.”
Fitch noted that “Louisiana's economic recovery has been steady, with year-over-year employment gains since December 2010, currently surpassing the national average, and the state has fully recovered employment lost during the recession. Employment growth in April 2012 was above that of the nation, with 2.4% year-over-year growth compared to 1.3% for the nation.”
Among the factors in its rationale for its assigned rating, Moody’s cited Louisiana’s “strong financial position and healthy liquidity in recent years” as well as “the state's speedy responses to downward revenue projections; healthy economic trends relative to the nation; and debt policies that have lowered the state's debt ratios over time.”