OREANDA-NEWS. Fitch Ratings has assigned an 'AA+' rating to the following Alaska Housing Finance Corporation (AHFC) bonds:

--$100 million General Mortgage Revenue Bonds II 2016 Series A.

Additionally, Fitch has affirmed 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 secured by the Indenture obligations, which consist of the mortgage loans, investments and reserves, and revenues of the program. Additionally, the bonds are general obligations of AHFC for which its full faith and credit are pledged.

KEY RATING DRIVERS

STRONG FINANCIAL POSITION: AHFC consistently maintains one of the highest financial strength profiles, which contributes to its 'AA+' GO rating. The corporation's sizeable asset base allows it to maintain its credit strength despite several years of net operating losses from fiscal years 2010 - 2014. The corporation had a net operating gain in FY 2015.

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 1.72% (60+ days) as of May 31, 2016, 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 and any bonds based on the GO rating.

CREDIT PROFILE

The 2016 Series A bonds are the third issuance under the General Mortgage Revenue Bonds II Indenture. As of June 30, 2016, there was an aggregate principal amount of $121,580,000 outstanding under the Indenture. The bonds proceeds will be used to purchase mortgage loans from a pool of previously originated mortgage loans as well as to purchase mortgage loans on and after the date of issuance. The 'AA+' rating on the bonds reflects AHFC's GO debt pledge.

AHFC continues to illustrate its strong financial position despite net losses, which were primarily attributed to transfers to the state, from fiscal years 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 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 any potential negative change to AHFC's annual transfer policy. A statutory change, effective in fiscal 2003, caps AHFC's annual transfers to the state at the lesser amount 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 and any bonds based on the 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. Should a natural disaster occur in this area, it could impact a majority 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;

--$121.6 million General Mortgage Revenue Bonds II, 2012 series A;

--$62.9 million Home Mortgage Revenue bonds, 2002 series A;

--$239.4 million Home Mortgage Revenue bonds, 2007 series A, B & D;

--$242.6 million Home Mortgage Revenue bonds, 2009 series A, B, & D;

--$37.7 million State Capital Project bonds, 2002 series C;

--$32.4 million State Capital Project bonds, 2007 series A & B;

--$74.7 million State Capital Project bonds, 2011 series A;

--$83.2 million State Capital Project bonds II, 2012 series A;

--$136.8 million State Capital Project bonds II, 2013 series A & B;

--$341.5 million State Capital Project bonds II, 2014 series A, B, C, & D;

--$201.8 million State Capital Project bonds II, 2015 series A & B;

--$55.1 million State Capital Project bonds II, 2015 series C.