Press Release|Public Finance
KBRA Affirms AAA Rating with Stable Outlook for Commonwealth of Massachusetts Special Obligation Revenue Bonds (Unemployment Insurance Trust Fund)
23 Jun 2023 | New York
KBRA affirms the long-term rating of AAA with a Stable Outlook for the Commonwealth of Massachusetts Special Obligation Revenue Bonds (Unemployment Insurance Trust Fund).
Key Credit Considerations
The rating was affirmed because of the following key credit considerations:
Credit Positives
- Broad pledged derived from a sizable and diverse wage base, with an unlimited rate re-set annually while bonds are outstanding to provide at least 1.25x debt service in the following year, plus administrative charges.
- Strong legal framework and collection processes supporting solid collection rates.
- A structure that allows for the early retirement of debt, thus reducing the overall burden and potentially shortening the maturity of the obligations.
Credit Challenges
- The pledged revenue base is subject to economic volatility, with collections directly tied to Commonwealth-wide employment levels, as evidenced by instances of YoY revenue declines realized in three of the past 15 years.
- The on-time collection rate for unemployment taxes is also somewhat cyclically sensitive contributing to uncertainty in determination of the COVID-19 Recovery Assessment rate each year needed to generate covenanted debt service coverage.
Rating Sensitivities
For Upgrade
- Not applicable for the current rating level.
For Downgrade
- A material reduction in debt service coverage levels.
- A material spike in Commonwealth unemployment levels and associated benefit filings, necessitating a protracted depletion in UITF resources.
To access rating and relevant documents, click here.