Fitch Ratings assigns 'F1+' ratings to the following bond anticipation
notes (BANs) backed by the state of Ohio's liquor enterprise:
--$34.03 million chapter 166 development assistance BANs, series 2012A
(logistics and distribution program);
--$40 million chapter 166 taxable development assistance BANs, series
2012B (Ohio 166 direct loan program);
--$5 million chapter 166 taxable development assistance BANs, series
2012C (innovation Ohio loan program);
--$115 million chapter 151 revitalization project BANs, series 2012A.
The BANs are scheduled to sell via negotiation on May 23, 2012. The BANs
are expected to mature on May 30, 2013 although they are subject to call
at any time.
Fitch also affirms the 'AA-' rating and Stable Outlook on approximately
$641.5 million in outstanding bonds issued under chapters 166 and 151 of
The BANs are secured by a pledge of profits of the state from its sale
of spirituous liquor, the Chapter 166 BANs on a first priority basis,
and the Chapter 151 BANs on a subordinated basis. No rating distinction
is made between the senior lien Chapter 166 bonds and the subordinate
lien Chapter 151 bonds due to strong debt service coverage of both liens.
KEY RATING DRIVERS
LONG-TERM BONDS WILL REDEEM BANS: The 'F1+' ratings on the notes reflect
the security and expected source of repayment at maturity, which is
long-term bonds supported by net profits of the state's liquor
NARROW SOURCE OF PLEDGED REVENUES: The 'AA-' ratings on the senior lien
Chapter 166 bonds and subordinate lien Chapter 151 bonds reflect the
narrow and discretionary source of securing revenues offset by the long
history of operations, as well as the growth and high level of profits
from the state's liquor enterprise.
SOLID GROWTH IN PLEDGED REVENUE: Liquor profits have demonstrated solid
growth in recent years with price increases, premium beverage sales, and
a reduction in wholesale discounts. However, risk of volatility remains
from changes in consumer tastes, purchasing habits, prices, or state or
STRONG DEBT SERVICE COVERAGE: Debt service coverage on currently
authorized bonds is strong on both an annual and maximum annual debt
service (MADS) basis. Limits on additional bonding and allowable debt
service help to keep coverage high.
PLANNED TRANSFER OF SYSTEM: The state plans to lease the liquor
enterprise system to a not-for-profit entity, which would result in a
changed use of state liquor enterprise revenue. The lease would be
contingent upon the required redemption and defeasance of all
outstanding Chapters 166 and 151 debt obligations, including these
notes. If the transfer were not to take place prior to note maturity,
Fitch expects that the notes would be taken out with Chapter 166 and 151
ONGOING LITIGATION IMPEDES TRANSFER: The state's plan to lease the
liquor enterprise system to the new not-for-profit JobsOhio program has
been delayed by ongoing litigation.