Oklahoma Series 2019A Master Real Property Lease Revenue Bonds Assigned 'AA-' Rating

NEW YORK (S&P Global Ratings) April 17, 2019--S&P Global Ratings assigned its 'AA-' rating to the Oklahoma Development Finance Authority's (ODFA) $18.26 million series 2019A Oklahoma State System of Higher Education master real property lease revenue bonds, issued for Oklahoma, based on the application of S&P Global Ratings' "Issue Credit Ratings Linked To U.S. Public Finance Obligors’ Creditworthiness" criteria (published Jan. 22, 2018, on Ratings Direct).
At the same time, we affirmed our 'AA' rating on the state's existing general obligation (GO) bonds and our 'AA-' ratings on the state's outstanding appropriation debt. The outlook on all ratings is stable.
"The stable outlook reflects our view of Oklahoma's return to more favorable economic conditions and improving revenue forecast that will likely contribute to an operating surplus for fiscal 2019," said S&P Global Ratings credit analyst Thomas Zemetis. "The outlook also reflects our expectation that growth in the state's certified revenues will, at least, match growth in appropriations, supporting a structurally balanced budget environment for the upcoming fiscal 2020 budget."
Lease-rental payments by the State Regents of the Oklahoma State System of Higher Education to ODFA, pursuant to a master equipment lease purchase agreement between Oklahoma State System of Higher Education (the lessee) and ODFA (the lessor) secure the 2019A bonds. The lease-rental payments are subject to annual appropriation by the Oklahoma legislature to the Oklahoma State System of Higher Education, acting on behalf of certain Oklahoma colleges and universities. We rate this obligation one notch lower than Oklahoma's general creditworthiness (as reflected in the GO rating) to account for the appropriation risk associated with the lease payment. The State Regents has pledged its best efforts to seek appropriations annually from Oklahoma's operating budget, and the state has considered the affordability of the lease payment in its long-term plans. We considered the affordability and likelihood of the lease payment, which is reflected in the (appropriation) rating and in our view of the Oklahoma's general creditworthiness. In our view, the lease agreement features and terms have no unusual risks regarding timely payment of debt. We consider Oklahoma to have a strong relationship with the lessee and projects and the intended payment source are strong.
Series 2019A bond proceeds will be used to refinance the outstanding principal amount of the authority's series 2009C master real estate property lease revenue bonds, and refund the outstanding principal amount of the authority's series 2009D master real estate property lease revenue bonds, which were issued to finance various capital improvements at member colleges and universities of the Oklahoma State System of Higher Education. These member colleges and universities include Eastern Oklahoma College, Northeast Oklahoma A&M, Tulsa Community College, Oklahoma Panhandle State University, Redlands Community College, and Oklahoma State University.
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