Alaska had its bond rating raised to the highest investment grade by Moody’s Investors Service after the oil-rich state amassed financial reserves of $14 billion.
Moody’s raised Alaska one level to Aaa from Aa1 before a $200 million bond sale by the state, which currently has about $475 million of general-obligation debt outstanding. Alaska joins 14 other states, including Texas and Maryland that have a top rating from Moody’s.
“We believe the magnitude of reserves, along with conservative financial management, will lead to enduring fiscal strength under all plausible scenarios over the next five to 10 years,” Moody’s said in a news release today.
Alaska plans to sell taxable and tax-exempt general- obligation bonds the week of Dec. 6. A higher credit ranking may lower the state’s borrowing costs.
Alaska’s reserves have expanded to $14 billion as the price of oil rose from less than $20 a barrel in early 1999 to about $80 a barrel currently and could pay for almost three years of operating expenses, Moody’s said. The state receives about 90 percent of its general-fund unrestricted operating revenue from oil-producer royalties, and taxes, the rating company said. Unrestricted operating revenue excludes federal and certain other revenue.
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