S&P: IMS Health Inc.'s New Senior Unsecured Notes Rated Preliminary 'BB+'
At the same time, we assigned our 'AA+' long-term rating to Hawaii's following planned bond issues:
$375 million series 2016 FG GO bonds,$353 million series 2016 FH refunding GO bonds,$4 million series 2016 FI refunding GO bonds, and$25 million series 2016 FJ taxable GO bonds. The outlook on all the state's debt ratings is stable.
"The upgrades reflect our view that Hawaii's fiscal position and outlook have continued to strengthen, aided by formalization of its reserve policy and demonstrated commitment to managing its long-term liabilities," said S&P Global Ratings credit analyst Gabriel Petek.
Favorable revenue trends have enabled the state to accumulate impressive general fund ending balances and budget reserves that, in our view, add to its capacity to weather the potential for economic softening. Early in fiscal 2017, Governor David Ige signed an administrative directive specifying an unassigned general fund carryover balance of at least 5% and an emergency and budget reserve fund (EBRF) balance of at least 10% of prior-year revenues as state reserve objectives. On a combined basis, the state's general fund and EBRF balances at the end of fiscal 2016 exceeded this 15% target. While financial reserves remain particularly important for Hawaii given its above-average fixed costs stemming from its relatively large long-term liabilities, it has achieved an especially strong position.
The 'AA+' GO rating reflects our view of:
The state's strong financial position, which has weathered several major economic stressors during the past 15 years;Strong liquidity, particularly when including pooled cash balances available to the general fund for temporary interfund borrowing;The prioritizing of contributions to the retiree health care benefits system, resulting in a lowering of actuarial estimates of the state's long-term liability;Management's well-established, proactive budget monitoring practices, including frequent revenue forecast updates from the independent Council on Revenues, which facilitates prompt identification of potential budget adjustments for budget alignment;The governor's executive authority to restrict all executive branch expenditures through such actions as cutting spending midyear without legislative approval or cutting or delaying disbursements during the course of a fiscal year; andOther strong constitutional protections, including requiring budget balance, that allow for tax increases with legislative approval and give GO bonds first-lien priority before all other disbursements.