On April 5, 2010, Fitch, Inc. (Fitch) recalibrated its U.S. public finance ratings on states and certain other credits related to states, including state guaranteed credits. Any ratings changes that have resulted from the recalibration are likely material events that should be reported promptly to the Municipal Securities Rulemaking Bureau via its Electronic Municipal Market Access (EMMA) system with respect to any affected bonds.
It should be noted, however, that Fitch issued a press release regarding its recalibration process, which states that “the recalibration of certain public finance ratings should not be interpreted as an improvement in the credit quality of those securities.” Any material event notice filed in connection to the recalibration should note that the change does not necessarily reflect any improvement in the credit quality of the securities described in such notice. An example of material event notice language is attached hereto as Exhibit A.
Fitch also announced that it would similarly adjust investment-grade local general obligation bonds, special tax-backed bonds, water/sewer and public power distribution bonds and public higher education bonds in the near future. Ratings in the sectors listed above that are below investment grade will be considered for recalibration on a case-by-case basis. No material event disclosure is required for such securities at this time, but will be necessary when such ratings are actually changed.
A full copy of the press release by Fitch and additional information about the global rating recalibration process and current Fitch ratings on outstanding securities can be obtained from Fitch on its website at www.fitchratings.com. The public finance professionals at Edwards Angell Palmer & Dodge LLP are available to assist you in determining whether securities issued by your organization or governmental entity are affected, and can help prepare and file any necessary notices to comply with disclosure obligations.