[July 24, 2014]

Fitch Affirms South Carolina's School District Credit Enhancement Program at 'AA+'; Outlook Stable

Fitch Ratings has affirmed the outstanding 'AA+' rating on the South Carolina School District Credit Enhancement Program. The Rating Outlook is Stable.

SECURITY

School district general obligation (GO) bonds are enhanced by the state's obligation to intercept school aid payments to make debt service payments in a timely manner.

KEY RATING DRIVERS

ABILITY TO INTERCEPT STATE SCHOOL AID: The rating reflects the strong structural, legal, and administrative protections of the program and, ultimately, South Carolina's obligation to intercept school district aid payments for payment of district enhanced GO bonds in a timely manner.

SOUND PROGRAM MECHANICS: Program mechanics provide for full and timely payment of debt service from appropriated state aid.

STATE GENERAL FUND TRANSFERS PROVIDE ADDITIONAL SECURITY: Should a delinquent school district have insufficient moneys available to intercept for debt service, the state treasurer is required to transfer sufficient moneys from the general fund of the state to make full and timely payment of debt service limited only by the total available state appropriation for education in that fiscal year.

RATING SENSITIVITIES

STATE CREDIT QUALITY: The rating is sensitive to movements in the state of South Carolina's 'AAA' GO bond rating to which it is linked.

CREDIT PROFILE

Fitch will assign an 'AA+' rating with a Stable Outlook to South Carolina school district GO bonds qualifying for participation in the School District Credit Enhancement Program. The rating is based on strong statutory provisions and program mechanics, as well as the state's general credit condition expressed in its 'AAA' GO bond rating. Procedures to ensure timely delivery of state moneys are strong and all school districts are covered by the intercept when they issue GO bonds according to state statute.

Prior to delivery of additional GO bonds, a school district must file its debt service payment schedule with the office of the state treasurer. Pursuant to state law, the county treasurer or any other paying agent must notify the state treasurer if sufficient debt service moneys have not been remitted by a school district at least 15 days prior to the debt service payment date. Should the county treasurer confirm that debt service moneys remain insufficient three days prior to the bond payment date, the state treasurer is directed to advance state general fund moneys to fulfill the school district's debt service obligation.

The program limits the amount that may be advanced on behalf of a school district in any fical year to that year's statewide appropriation for basic education under the Education Finance Act (EFA). This funding ceiling is an absolute dollar limitation and is not reduced by the regular disbursement of EFA moneys to school districts throughout the fiscal year. Upon advancement of funds, the state treasurer will withhold future state aid due the district sufficient to reimburse the state's general fund the advanced amount plus interest. Additionally, the county auditor is directed to adjust the district's future debt service property tax rates, correcting the prior financial distress.

All school districts are covered by the intercept when they issue GO bonds according to state statute. The enhanced rating can be applied if there is 1.25x coverage of historical annual school aid to pro forma maximum annual debt service, and debt service payment dates are set such that available school aid is expected to be sufficient to meet debt service payments.

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

Applicable Criteria and Related Research:

--'Tax-Supported Rating Criteria', Aug. 14, 2012

--'State Credit Enhancement Program Criteria', April 18, 2013

--'U.S. State Government Tax-Supported Rating Criteria', Aug. 14, 2012.

Applicable Criteria and Related Research:

Rating Guidelines for State Credit Enhancement Programs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=704880

U.S. State Government Tax-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686033

Tax-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686015

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=841461

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON (News - Alert) THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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