BATON ROUGE – Late Tuesday, Fitch Ratings assigned an ‘AA’ rating to $300 million Louisiana general obligation (GO) bonds that are expected to sell competitively on March 1, 2011. In addition, Fitch affirmed the ‘AA’ rating of approximately $2.4 billion in outstanding Louisiana GO bonds, and the ‘AA-‘ rating of approximately $449.1 million in outstanding Louisiana appropriation backed bonds. Fitch also described Louisiana’s rating outlook as "stable."
Better ratings, like higher credit scores, typically mean better borrowing terms that save the state money in interest costs.
Among its rationales for assigning the ratings, Fitch stated that “Louisiana has made progress toward increased economic diversification,” that “the state's financial management has been solid,” and that “debt levels are moderate and debt issuance is well controlled by policy.”
“Key rating drivers” cited by Fitch were Louisiana state government’s “continued timely action to maintain budget balance and maintenance of solid financial balances,” as well as “ongoing progress towards economic diversification.”
Governor Bobby Jindal said, “We continue to pursue pro-growth policies that expand and diversify Louisiana’s economy while reducing the size and cost of government. It’s a strategy that has helped Louisiana’s economy outperform the nation and the south, and I’m glad to see that strategy affirmed by the financial experts.”
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 GO bonds have received a rating from Fitch above the single ‘A’ range since Fitch began rating Louisiana in 1997.
Fitch’s rating follows a similar move by Moody’s Investment Service, which on Monday also gave Louisiana a “stable” outlook and assigned an ‘Aa2’ rating to Louisiana’s GO bonds.
Moody’s rationale for their rating stated:
“The Aa2 rating reflects the state's strong financial position and healthy liquidity in recent years, primarily due to large amounts of federal money flowing into the state for post-hurricane rebuilding and federal stimulus aid and, to a lesser degree, upward trends in oil and gas prices; the state's speedy responses to downward revenue projections; healthy economic measures relative to the nation; an improved business environment and active economic development plans; and debt policies that have lowered the state's debt ratios over time.”