Standard & Poor's Corp. yesterday its ratings on Connecticut Housing Finance Authority bonds, affecting about $2.9 billion of outstanding debt.

The rating agency lowered to AA from AA-plus about $2.7 billion housing bonds, Series 1972A through 1989C, Series 1990A and 1990B, Series 1990D, and Series 1991A through 1991C.

In addition, ratings on $177 million of variable-rate housing bonds Series 1989D, 1990C, and 1992A were lowered to AA/A1-plus from AA-plus/A1-plus.

The authority had been on CreditWatch with negative implications since Feb. 4, 1991, when the agency also placed the state's AA-rated general obligation bond rating on CreditWatch. The state's GO rating has since been dropped to AA-minus by Standard & Poor's.

Taking a contrarian stance on the housing authority's downgrade, Gary King, head of the housing authority, called the rating action positive.

"I think the authority is definitely an AA-plus credit," said King. "But this is the first time the authority's rating was considered without the backing of the state. We're very encouraged."

King, who has headed the authority since April, said previous rating changes have been made in conjunction with the state's GO debt.

"Although the state still maintains a $340 million reserve fund to provide for the authority in case of a disaster, this rating says that even in a depression we have adequate assets to provide for ourselves," he said.

Wendy Dolber, a director at Standard & Poor's, said the authority's current rating reflects the high quality of the mortgage loan collateral, positive depression scenario cash flows demonstrating sufficient loan coverage, high quality of investments, and the general obligation of the authority.

"Really, the rating reflects how strong the authority is without the backing of the state," Dolber said. "The quality of the rating places it as a top-tier credit."

King said the rating is positive because the authority is contemplating issuing more bonds, but was unsure when those bonds should be brought to market.

"Every time we issue debt, we improve our asset base," he said. "With a few more issues, we should regain our AA-plus standing."

The authority's mortgage portfolio, Dolber said, is composed of 77% single-family mortgage loans and 23% multifamily mortgage loans.

She said that most of the loans are backed by either conventional mortgage insurance, the Federal Housing Administration, or the Veterans Administration.

In the rating report, the agency said a problem with the authority exists in the uninsured credits.

The report says 32% of the authority's multifamily housing loans are on their "delinquent" or "watch" lists.

But despite these delinquencies, the report describes the authority as "demonstrating sufficient revenues to pay debt service and fees on the bonds... even in a depression scenario.

"We think the rating change is truly in the best interest of the state," King said. "Now the authority will not be concerned with the general obligation side, and we will be more autonomous."

King said he expects Moody's Investors Service to look at the authority's debt within the next few weeks. He added that the authority is not currently rated by Fitch Investors Service, but is considering applying for a rating.

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