CHICAGO--(BUSINESS WIRE)--Fitch Ratings has affirmed its 'AAA' ratings on the following Massachusetts Clean Water Trust (MCWT), formerly the Massachusetts Water Pollution Abatement Trust, New Bedford loan program revenue bonds:

--$785,000 in outstanding revenue bonds, series 1996A.

The Rating Outlook is Stable.

SECURITY

The bonds are secured by loan repayments payable from the city of New Bedford, Massachusetts (New Bedford), pledged debt service reserves, interest earnings, Commonwealth of Massachusetts (the Commonwealth) contract assistance payments (CAP), and available released reserves from the deficiency fund established under the MCWT pool program (rated 'AAA' with a Stable Outlook by Fitch).

KEY RATING DRIVERS

SUBSTANTIAL PLEDGED RESERVES: Debt service reserves currently total approximately $9.9 million or 12.6x outstanding bond principal. These reserves do not include certain pledged reserves released to the deficiency fund established under the MCWT's pool program, which are also available for payment of debt service.

SOUND RESERVE INVESTMENT PRACTICES: New Bedford's program debt service reserves are invested in a highly rated guaranteed investment contract (GIC), which is fully collateralized.

SOLID LOAN REPAYMENT HISTORY: New Bedford has always paid its loans to MCWT when due, and MCWT has not experienced a loan default in any of its leveraged programs to date.

RATING SENSITIVITIES

DETERIORATION OF RESERVES: The sustained credit quality of reserve investments is important to maintaining the current 'AAA' ratings.

CREDIT PROFILE

The MCWT issues bonds to fund loans for its clean water and drinking water state revolving funds. MCWT has issued bonds under indentures for four separate programs, one each for New Bedford, South Essex Sewerage District, MWRA, and the fourth for MCWT's larger statewide pool program. The MCWT New Bedford outstanding program bonds, which are scheduled to mature on Feb. 1, 2016, were issued under a standalone indenture to prevent borrower concentration in the statewide pool program due to significant capital requirements associated with New Bedford. No additional debt will be issued under the MCWT New Bedford indenture as the lien is closed.

RESERVES SIGNIFICANTLY OVER-COLLATERALIZE STANDALONE STRUCTURE

The primary security for the bonds is loan repayments from New Bedford. In addition, MCWT pays a portion of bond debt service with amounts received by the Commonwealth (the CAP), which allows for below-market interest rate loans to New Bedford. Further, the bonds are secured by debt service reserves that are required to be maintained at the greater of 50% of the aggregate outstanding bond principal or maximum annual loan repayments.

Reserves dedicated to the MCWT New Bedford program bonds substantially exceed the required level because some of the MCWT New Bedford bonds have been escrowed to maturity through refunding bonds issued through the MCWT statewide pool program.

EXCESS RESERVES RELEASED INTO STATEWIDE POOL

As the MCWT New Bedford bonds amortize, a portion of the reserves are released to the deficiency fund and are available to cover any shortfalls within any of MCWT's standalone programs as well as MCWT's state-wide pool program on a parity basis. While reserves are deallocated as the bonds amortize (according to a set schedule), MCWT's projected release schedule does not deallocate reserves at a level that would decrease the significant coverage provided to the outstanding New Bedford loan program bonds.

SOUND INVESTMENT PRACTICES

Reserve investment practices are generally strong as assets are currently invested in a guaranteed investment agreement (GIC) with JP Morgan Chase Bank, NA (long-term Issuer Default Rating of 'A+', Stable Outlook). The GIC is also fully collateralized by U.S. Treasury and agency securities in excess of 100%.

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

Applicable Criteria and Related Research:

--'Revenue-Supported Rating Criteria', dated June 16, 2014;

--'State Revolving Fund and Leveraged Municipal Loan Pool Criteria', dated April 28, 2014.

Applicable Criteria and Related Research:

Revenue-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=750012

State Revolving Fund and Leveraged Municipal Loan Pool Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=792908

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=929535

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