Moody's upgrades Ohio to Aaa

BY SourceMedia | CORPORATE | 12/01/23 05:00 PM EST By Caitlin Devitt

Moody's Investors Service (MCO) Friday lifted Ohio's issuer default and general obligation ratings to triple-A based on strong financial management and an economy that's "poised for diversification and growth."

The state now boasts the coveted top issuer rating from Moody's and Fitch Ratings, which upgraded it in September 2022. S&P Global Ratings pegs the state one notch below the top mark at AA-plus with a stable outlook.

Moody's upgrade reflects Ohio's "sound budgetary and financial management, highlighted by a trend of strong and growing reserves and liquidity, and affordable fixed costs associated with Ohio's low and declining leverage," the agency said in the upgrade report.

Though the state's economic and demographic trends have typically lagged the nation and "that will not change rapidly," Moody's predicted that "recent major investments related to electric vehicles and microchips will drive growth in high paying manufacturing jobs."

Moody's last rated Ohio with its highest credit rating in 1979, according to the state.

Republican Gov. Mike DeWine called the upgrade "strong external validation that our strategy is delivering results for Ohio. I am proud that our record shows we are the best state to live, grow or start a business, and raise a family."

The upgrade comes ahead of a $391 million general obligation bond issue set to price on Dec. 12. Loop Capital Markets is senior manager and PFM Financial Advisors LLC is financial advisor.

The upgrade affects $6.7 billion of Moody's-rated GO bonds, which includes $864 million of highway capital improvement bonds that feature a GO pledge. The ratings agency also upgraded $2.9 billion of outstanding lease appropriation bonds and certificates of participation to Aa1 from Aa2.

Moody's lifted several other state-related credits, including $879 million of Garvee bonds issued by the Ohio Department of Transportation.

"Our finances are stronger than at any time in history, our economy is surging ahead, and our budget is focused on ensuring that all corners of Ohio grow," said Ohio Office of Budget and Management Director Kimberly Murnieks in a statement. "We have reduced taxes and invested in results, and our priorities will continue to provide unlimited opportunities for Ohioans."

The upgrade makes Ohio the 17th state that's rated triple-A by Moody's.

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

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