Fitch Rates Indiana Fin Auth’s Stadium and Convention Center Project Bonds ‘AA+’; Outlook Stable

NEW YORK

Fitch Ratings assigns an ‘AA+’ rating to the following Indiana Finance Authority’s (IFA) lease appropriation refunding bonds:

–Convention Center Expansion Project, series 2015A;

–Stadium Project, series 2015A.

The Rating Outlook is Stable.

The bonds are expected to sell via negotiation during the week of May 4.

SECURITY

The bonds are limited obligations of the IFA, secured by biennial state legislative appropriations. However, the state expects that local earmarked tax revenues will continue to be sufficient to pay debt service and state general fund revenues will not be necessary for this purpose.

KEY RATING DRIVERS

APPROPRIATION SECURITY: Bond payment relies ultimately on biennial legislative appropriations, although appropriation risk is mitigated by the state’s reliance on appropriation debt to fund its capital program and the requirement of legislative approval for projects and financings. General obligation debt is constitutionally prohibited.

LOW DEBT BURDEN: Indiana’s low debt burden is one of the key credit strengths underlying its high rating. Most of the state’s net tax-supported debt burden covers transportation needs, including those funded through public-private partnerships. Indiana expects a portion of the public-private partnership obligations to be self-supporting from toll revenues.

HIGH RESERVE LEVELS: Indiana’s budget management is strong and the state prudently used the recovery from the recession to build up and maintain solid reserves. Revenue forecasts have been revised downwards, but Fitch anticipates the state will manage to a stable fiscal profile.

MANUFACTURING-HEAVY ECONOMY: An economy that remains considerably concentrated in manufacturing, particularly transportation equipment, exposes the state to economic downturns and emphasizes the importance of Indiana’s reserve balances.

RATING SENSITIVITIES

The rating is sensitive to shifts in the state’s implied GO rating of ‘AAA’, to which this rating is linked.

CREDIT PROFILE

The bonds are being issued to refund certain IFA outstanding variable-rate bonds into fixed-rate bonds, and terminate associated swaps. Ultimately, the security for the bonds rests with the biennial state legislative appropriations for rental payments equivalent to debt service. Dedicated local tax revenues have been sufficient to pay debt service since issuance, and the state expects state general fund revenues will not be needed.

Under the various lease and sublease agreements for the bonds, the state’s Office of Management and Budget (OMB) is obligated to make up any shortfall in local tax revenues with general fund appropriations. OMB’s payments, from local tax revenues or state appropriations, are paid to the Indiana Stadium and Convention Building Authority, and then passed to the IFA. This structure is similar to that used for IFA’s appropriation-backed debt issued for state capital projects whereby a state agency commits to making all lawful efforts to obtain biennial legislative appropriations sufficient for regular payments. Accordingly, Fitch links the rating on the bonds directly to the state’s implied GO rating of ‘AAA’.

The ‘AAA’ implied GO reflects Indiana’s historical pattern of low debt, balanced financial operations, and a commitment to funding reserves to provide a cushion in times of economic and revenue decline. These strengths are offset by an economy that, despite ongoing diversification, remains heavily concentrated in the cyclical manufacturing industry.

For more information on the state’s implied GO rating, please see the Fitch release titled ‘Fitch Rates Indiana Finance Auth – East End Crossing Project TIFIA Loan ‘AA+”, dated April 8, 2015 and available at ‘www.fitchratings.com‘.

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

In addition to the sources of information identified in Fitch’s report ‘U.S. State Government Tax-Supported Rating Criteria’, this action was additionally informed by information from IHS.

Applicable Criteria and Related Research:

–‘U.S. State Government Tax-Supported Rating Criteria'(Aug. 14, 2012);

–‘Tax-Supported Rating Criteria’ (Aug. 14, 2012).

Applicable Criteria and Related Research:

Tax-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686015

U.S. State Government Tax-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686033

Additional Disclosure

Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=983619

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Fitch Ratings
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Eric Kim, +1-212-908-0241
Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
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Karen Krop, +1-212-908-0661
Senior Director
or
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Douglas Offerman, +1-212-908-0889
Senior Director
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