Tuesday, October 25, 2011

Delaware Keeps AAA Credit Rating With Other People's Money

While the broader U.S. economy continues to ebb and flow, some are warning of another possible downgrade of the national credit rating.  Some other governments, however, are not having credit rating problems during these difficult times.

According to a press release on Marketwatch.com, Fitch Ratings assigned a AAA rating to Delaware's latest $275 million bond offering.  Among the factors that Fitch relied upon in making its determination to provide its highest rating was Delaware's revenue profile (that is, the sources of revenue brought in by the state, and the likelihood that those revenue streams would remain sufficient to discharge the state's bond obligations).  Given Delaware's status as a popular state of incorporation for domestic companies, its no surprise that unclaimed property revenue makes up an important slice of the First State's revenue mix.  As Fitch noted:
Delaware's revenue mix reflects its position as legal home of most U.S. corporations, with various fees and taxes as well as abandoned property revenue all linked to companies being legally domiciled in the state. Abandoned property typically accounts for 10% to 12% of general fund revenues though collections were a high 15% in fiscal 2010; this variable revenue stream has been negatively affected by the downturn in financial markets but the state's decision to shorten the dormancy period on held securities has resulted in an increase in these collections.

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