KBRA assigns a long-term rating of AA- with a Stable Outlook to the Alaska Municipal Bond Bank Authority's General Obligation Bonds. The rating reflects the underlying credit characteristics of the State of Alaska, the essentiality of the Bank's role in funding the capital needs of member governmental entities, and the State’s standing appropriation provision and moral obligation pledge towards replenishing any draws on dedicated debt service reserve funds through both a discretionary replenishment provision and the requirement to intercept the applicable State Aid payments of deficient borrowers to cure loan deficiencies. The rating is underpinned by the Bank’s requirement to annually report reserve fund sufficiency and to initiate a budgetary request for appropriations from the State Legislature to replenish the funds if necessary, and, as such, is based on an evaluation of factors discussed in KBRA’s U.S. State Annual Appropriation Obligation Rating Methodology. Because the mechanism effectively functions like a State annual appropriation, KBRA believes a one-notch rating differential is warranted between the State‘s G.O. rating and the Bond Bank.

Key Credit Considerations

The rating was assigned because of the following key credit considerations:

Credit Positives

• The essentiality of the Bank towards funding local government capital needs within the State;
• Extensive operating history, coupled with a solid history of debt repayment without realizing instances of loan payment default;
• Ample DSRF reserve balances, albeit partially satisfied with surety policies; and,
• Precautionary appropriation by the State each year since 2009 to make any AMBBA Capital Reserve Replenishments that may arise makes the State’s moral obligation more akin to that of an annual appropriation pledge.

Credit Challenges

• Sensitivity of loan repayments to the credit quality of underlying loan borrowers, which currently consist of approximately 37 local government entities.

Rating Sensitivities

For Upgrade

• An upgrade of the state’s bond rating.

For Downgrade

• A downgrade of the state’s bond rating.
• Failure of the Legislature to proactively grant AMBBA its annual standing appropriation for reserve replenishment. To access rating and relevant documents, click here.

Methodologies

Public Finance: U.S. State Annual Appropriation Obligation Rating Methodology

ESG Global Rating Methodology

Disclosures

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider.

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