OREANDA-NEWS. Fitch Ratings has affirmed the 'A+' rating on the following outstanding Maine Municipal Bond Bank's (the bond bank) qualified school construction bonds (QSCBs):

--\$9.2 million taxable direct payment QSCBs series 2011B;
--\$12.7 million taxable direct payment QSCBs series 2011D;
--\$8.5 million taxable direct payment QSCBs series 2011G;
--\$1.3 million taxable direct payment QSCBs series 2012D.

The Rating Outlook is Stable.

SECURITY

The bond bank pledges its full faith and credit for payment of debt service on the bonds. For each series of bonds, the bond bank has entered into a loan agreement with certain local governmental units (the borrowers) such that the borrowers will make annual payments to the bond bank in amounts equal to the bond bank debt service. The borrowers have pledged their full faith and credit to make payments under their respective loan agreements. Any missed payment under the loan agreement between the borrowers and the bond bank may trigger the interception of available state aid pursuant to state statute.

KEY RATING DRIVERS

STATE AID INTERCEPT PROVISION: The state has a statutory obligation to intercept local government or school district aid in the event of a missed payment under the loan agreements. Fitch believes there is sufficient time between loan payments and debt service payments on the bond bank's QSCB's to cure a loan default. However, the lack of detailed mechanisms limits the value of the credit enhancement provided by the intercept to two notches below the state's general obligation (GO) rating of 'AA' (Stable Outlook).

SATISFACTORY COVERAGE: Interceptable state aid to each of the borrowers provides satisfactory coverage of maximum annual debt service (MADS) on the respective series of bonds.

RATING SENSITIVITIES

CHANGE IN MAINE'S GO RATING: A change in the state's GO rating or Outlook would result in a comparable change to the bonds.

CHANGE IN STATE LAW: Changes in statutes, regulations, or administrative procedures governing the state aid intercept mechanism could trigger a rating action.

CREDIT PROFILE

The bond bank, an instrumentality of the state, has pledged its full faith and credit towards payment of the bonds, including amounts collected under the loan agreements. The bond bank does not have taxing power and generates its revenues from a narrow stream, including loan origination, administrative fees, and investment earnings. The bond bank currently has \$21.4 million in discretionary funds which may be used for any purpose including support of any of the bond bank's outstanding debt.

QSCBs SUPPORTED BY BORROWER LOAN AGREEMENTS

The bond bank entered into separate loan agreements with the borrowers pursuant to the bond bank's general bond resolution of taxable direct payment QSCBs. Each governmental unit agrees to pay the bond bank amounts due under its loan agreements, which in the aggregate, will be adequate to repay the bond bank bonds. There are no make-up provisions by non-defaulting governmental units in the event of nonpayment by one or more other governmental units.

The individual loan agreements are structured as serial bonds with level debt service payments, and the bond bank bonds are structured as term bonds to coincide with the maturity dates of the loan agreements. The bond bank will use a portion of the loan agreement payments to pay the interest on the bond bank bonds and invest the remainder in qualified investments, including treasuries, government sponsored entities and SLUGs. The invested proceeds plus interest will mature and retire the bond bank's term bonds. Payments under the loan agreements are due 30 days prior to the interest payment due dates on the bond bank bonds.

STATE AID INTERCEPT PROVISION

Pursuant to Maine Revised Statutes, Chapter 30-A, Part 2, Subpart 9, Chapter 225, Subchapter 3, Section 6014 (Governmental unit intercept) upon written notice to the state treasurer from the bond bank that a governmental unit has not paid or is in default on any obligation then held or owned by the bond bank, the state treasurer will withhold any funds or money due or payable to the governmental unit until the amount due to the bond bank is satisfied or arrangements satisfactory to the bond bank have been reached.

The lack of detailed intercept mechanics includes the optional nature of the notice to the state treasurer and the bond bank's ability to forgo the intercept if alternative arrangements are satisfactory to the bond bank. In Fitch Ratings' opinion, the non-mandatory intercept mechanics create potential uncertainty and additional risk. Only debt issued through the bond bank benefits from the state aid intercept provision, which has never been employed.

STRONG COVERAGE FROM STATE AID SUBJECT TO INTERCEPT

State aid is generally distributed to governmental units in equal monthly installments. Pursuant to state statute, the state is obligated to fund a majority of public education within the state, creating relative stability in state aid allocations. The amount of state aid received by each of the governmental units continues to provide solid coverage of MADS payable on debt supported by the state aid intercept provision. Such coverage is equal to at least 3.3x and in many cases is much higher.

For information on the respective series of bonds please see the following Fitch published rating commentaries:

'Fitch Affirms Maine Municipal Bond bank's Taxable QSCBs; Outlook Revised to Negative' (December 2012)

'Fitch Rates Maine Municipal Bond Bank's Taxable QSCBs 'AA-'; Outlook Negative' (April 2012)

'Fitch Rates Maine Bond Bank 2011 Ser G QCSBs 'AA-'; Outlook Stable' (September 2011)

'Fitch Rates Maine Municipal Bond Bank Bonds 'AA-'; Outlook Stable' (April 2011)