The state's credit enhancement program for school districts got off the ground last week as three general obligation bond issues received an AA rating by Standard & Poor's Corp.

The AA ratings were assigned to a $15.6 million Thief River Falls Independent School District No. 564 bond issue, a $2.9 million Cloquet Independent School District No. 94 refunding bond issue, and a $7.8 million Litchfield Independent School District No. 465 school building bond issue.

Earlier this month, the rating agency said it would assign a minimum AA rating to Go bonds eligible for the program. Standard & Poor's said it will assign a rating higher than the minimum if the issuer's credit quality exceeds that of the program. However, issuers whose credit quality is below the program rating will receive a AA rating if they meet specific criteria set by Standard & Poor's.

The School District Credit Program, approved by the Minnesota Legislature this year, is backed by a standing appropriation from the state's general fund is designed to prevent school district defaults, Standard & Poor's said. The program is especially attractive to school districts whose ratings are below that of the program's minimum AA rating, the rating agency said.

Under the program, a school district is required to deposit its debt service payment with its paying agent three days before the payment is due.

In turn, the paying agent is required to notify the state of a potential school district default three days before the debt service payment is due. If a default occurs, the paying agent will contact state officials and request the amount needed to avoid a default. The state would then forward state funds directly to the paying to the paying agent

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