[August 06, 2014]

Fitch Affirms Missouri School District Direct Deposit Program at 'AA+'; Outlook Stable

Fitch Ratings has affirmed the 'AA+' rating on the state of Missouri's School District Direct Deposit Program. The Rating Outlook is Stable.

SECURITY

Program bonds are enhanced by the state's obligation to directly deposit state aid payments with the trustee.

KEY RATINGS DRIVERS

--STRONG PROGRAM MECHANICS: The structure of the program provides for full and timely payment of debt service from state aid payments to participating school districts through direct deposit of monthly state aid payments to a trustee.

--SOLID REQUIRED COVERAGE BY STATE AID: Pursuant to program guidelines, participating school districts are required to demonstrate 1.5x coverage of maximum annual debt service (MADS) by state aid monies allocated to debt service, both in the year of issuance and in the two prior fiscal years.

--MISSOURI'S STRONG CREDIT QUALITY: The program rating reflects the state's overall credit quality, as reflected in its 'AAA' general obligation (GO) bond rating, upon which this program rating is based.

RATING SENSITIVITIES

STATE RATING: The rating on the credit enhancement program is directly linked to the state's GO debt rating.

PROGRAM CHANGES: Change in the statutes, regulations, or administrative procedures governing the direct deposit program that alter the current mechanisms to ensure timely payment of debt service could trigger rating action.

CREDIT PROFILE

The program rating is based on the ability of Missouri school districts to apply for direct deposit of monthly state aid payments to a trustee to pay debt service, the program's requirement for debt service coverage of at least 1.5x MADS by current and past aid revenues, and the state's general credit condition, expressed in its 'AAA' GO bond rating.

The structure and mechanics of Missouri's school district direct deposit program provide for full and timely payment of debt service from state aid payments. Program guidelines enable school districts to request that the state send the first dollars of monthly state aid distributions to a debt payment trustee in 10 approximately equal monthly installments. The trustee transfers moneys to the district's paying agent no later than one day prior tothe debt service payment date. The 10-month timeline for fulfilling annual debt service needs provides a two-month cushion to intercept additional available state aid moneys, if needed, for bondholders' benefit. This structure allows for a rating one notch below the state's GO bond rating.

Participating school districts must maintain debt service or capital projects tax levies sufficient to retire the bonds and may finance general operations with these funds through transfers structured to coincide in amount and timing with state aid moneys captured by the direct deposit mechanism for bondholders' benefit.

Upon request, Fitch will assign an 'AA+' rating to Missouri school district GO bonds qualifying for participation in the Direct Deposit Program.

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

Applicable Criteria and Related Research:

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

--'Rating Guidelines for State Credit Enhancement Programs', Apr. 18, 2013.

Applicable Criteria and Related Research:

U.S. State Government Tax-Supported Rating Criteria

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

Rating Guidelines for State Credit Enhancement Programs

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

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=846235

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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