OREANDA-NEWS. Fitch Ratings assigns an 'AA+' rating to the following Alaska Housing Finance Corporation (AHFC) housing mortgage revenue bank bonds:

--$80.88 million home mortgage revenue bonds, series 2009 B (bank bonds).

Additionally, Fitch affirms the ratings on approximately $1.7 billion in bonds backed by AHFC's general obligation (GO) pledge (see full list below).

The Rating Outlook on all bonds is Stable.

SECURITY

The bonds are general obligations of AHFC and its full faith and credit are pledged.

KEY RATING DRIVERS

STRONG FINANCIAL POSITION: AHFC consistently maintains one of the highest financial strength profiles, contributing to its 'AA+' GO rating. The corporation's sizeable asset base allows it to maintain its credit strength despite net operating losses in recent years.

SUCCESSFUL MANAGEMENT PERSONNEL: AHFC has a well-tenured management staff that continues to demonstrate the financial flexibility to address market challenges.

GEOGRAPHIC CONCENTRATION: A high portion of AHFC's loan portfolio, which provides security for other GO-backed bonds, is located in and around the city of Anchorage (53%). Geographic concentration is a limiting credit factor.

STRONG UNDERLYING ASSETS: The aggregate underlying mortgage portfolio of the corporation has performed adequately and has a delinquency rate of only 1.33% (60+ days) as of Nov. 30, 2015, which is lower than state and national averages.

RATING SENSITIVITIES

INCREASED STATE TRANSFERS: Under current legislative policies, transfers from Alaska Housing Finance Corporation (AHFC) to the state of Alaska are annually capped at the lesser of $103 million or 75% of change in net assets. Changes to this policy that could increase AHFC's exposure to potentially higher transfers, which could take the form of additional debt on behalf of the state, could put negative pressure on the corporation's general obligation rating.

CREDIT PROFILE

Based on a review of the standby bond purchase agreement supporting the substitution, the diversification of liquidity providers, and AHFC's strong cash levels, Fitch believes that AHFC's GO rating can support the additional risk associated with these potential bank bonds. The bank bond rating is assigned to the series 2009B bonds but will only become applicable if the bonds cannot be remarketed and are purchased by the bank providing the liquidity facility. In addition to assigning the ratings for these bank bonds, Fitch has also affirmed AHFC's GO rating and all outstanding AHFC GO debt.

AHFC continues to illustrate its strong financial position despite net losses, which were primarily attributed to transfers to the state, from fiscal years (FY) 2010-2014. The corporation has continuously maintained strong leverage and profitability ratios. As of FY 2015, the corporation had a debt-to-equity (DTE) ratio of 1.5x and a net interest spread (NIS) of 42.3%. Both ratios are better than the FY 2014 median DTE and NIS for all 51 state housing finance authorities (SHFAs) at 3.4x and 30.1%, respectively. The corporation's financial ratios can be attributed to its strong loan portfolio, sizeable equity base, and successful managerial oversight.

A credit concern going forward is a change to AHFC's annual transfer policy. A statutory change, effective in FY 2003, caps AHFC's annual transfers to the state at the lesser of $103 million or 75% of a change in net assets. This policy mitigates current concerns over transfers to the state; however, any changes to this policy that could increase AHFC's exposure to potentially higher transfers would put negative pressure on the corporation's GO rating.

An additional credit concern centers around the geographic concentration in AHFC's loan portfolio. Anchorage and its suburb, Wasilla/Palmer, account for approximately 53% of the corporation's loan portfolio and should a natural disaster occur in this area it could impact most of the loan portfolio, which could put pressure on the GO rating. This risk is mitigated somewhat by AHFC's sound financial position. Additionally, Alaska's real estate market is vulnerable to the state's cyclical oil-driven economy and is monitored closely.

Fitch has also affirmed the following AFHC bonds at 'AA+':

--$14.6 million (University of Alaska) Governmental Purpose Bonds 1997 series A;
--$43.1 million State Capital Project bonds, 2002 series C;
--$80.2 million Home Mortgage Revenue bonds, 2002 series A;
--$86.7 million State Capital Project bonds, 2006 series A;
--$74.3 million State Capital Project bonds, 2007 series A & B;
--$164.4 million Home Mortgage Project bonds, 2007 series B & D;
--$240.3 million Home Mortgage Project bonds, 2009 series A, B, & D;
--$77 million State Capital Project bonds, 2011 series A;
--$129.1 million General Mortgage Revenue Bonds II, 2012 series A;
--$87.3 million State Capital Project bonds II, 2012 series A;
--$136.8 million State Capital Project bonds II, 2013 series A & B;
--$342.4 million State Capital Project bonds II, 2014 series A, B, C, & D;
--$204.9 million State Capital Project bonds II, 2015 series A & B;
--$55.71 million State Capital Project bonds II, 2015 series C.