Municipal Bond Forum
Mass. bonds for Boston University
Q
Why has the rating of my municipal bond, Massachusetts St. Dev. Fin., CUSIP 57583fzx2, gone from “AAA” to “A-“?
A
James A. Klotz responds:
Your bonds were issued by the Massachusetts Development Finance Agency for Boston University. The bonds carry bond insurance from XLCA. XLCA has since been downgraded from “AAA” to “BBB-“. Boston University’s underlying, or natural rating, is “A-“ on its own. Since the “A-“ is now higher than the bond insurer’s rating, the bond carries the higher of the two.
Technically, XLCA’s insurance is still in place as long as the company remains solvent. However, Boston University is a strong credit on its own and has always easily met its debt service from its own funds without relying on the bond insurer. We expect this strong track record to continue.
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