Nevada Retains High Credit Rating from All Three Major Rating Agencies
By Nevada News Bureau Staff
CARSON CITY – Nevada State Treasurer Kate Marshall announced today that the state has maintained its high credit rating after discussions last month with each of the three major rating agencies.
Fitch Ratings and Standard and Poor’s rated Nevada’s credit worthiness at AA+ and Moody’s Investment Services at Aa1. The ratings are measures of the state’s general credit worthiness and are used by both institutional and retail investors in deciding whether to buy the state’s debt. The ratings also determine the cost at which the state’s bonds trade with a high credit rating resulting in reduced costs on the debt issues.
“AA” ratings are judged to be of high quality and are subject to very low credit risk. “AAA” is the highest rating possible, with “CC” being the lowest.
“These ratings reflect the prudent actions taken by the state to meet its financial obligations in spite of the severe economic downturn Nevada has experienced over the past two years,” Marshall said.
The rating agencies cited the strong financial management and conservative debt position of the state as reasons for maintaining its high credit rating despite the economic weakness the state has experienced the last several years.
In its rating rationale, Moody’s Investment Services cited “conservative management that reacts quickly during periods of weakness and has responded with budget solutions quickly during the current downturn.” The state’s debt reserve was also emphasized as a strong component of the continued high rating, with the Treasurer’s Office maintaining a debt reserve prefunding of almost an entire year’s debt service, well above the recommended best practice model of at least six months.
Senior Deputy State Treasurer Mark Mathers said Moody’s did revise its outlook for the state to negative, which indicates a possible ratings change in the intermediate term, but that the change is not expected to have an effect on its bond sales. The change in outlook is the least significant of three actions a rating agency can take, he said.
Rating agencies review each state’s fiscal solvency at least once a year. The agencies look primarily at the economic conditions facing a state in the public and private sector. The state of Nevada benefits from having a balanced budget requirement as part of its Constitution; however, how the budget is met plays a major role in a credit agency’s rating.
“The state of Nevada has not used financial schemes or borrowed money to meet its statutory obligation,” Marshall said. “The rating agencies will be watching intently to see how our continuing budget struggles are met during the 2011 legislative session.”
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