Both the PPRF senior lien and PPRF subordinate lien have indentured debt service reserve funds that can be used to meet bond debt service shortfalls for any PPRF loan.
As part of PPRF credit structuring, lower rated PPRF loans are required to fund individual debt service reserves, which reserves in total exceed 30% of annual PPRF loan debt service obligations. Individual PPRF debt service reserve funds are held by the Trustee and are immediately available to cover individual loan debt service shortfalls as needed.
In total, over 65% of PPRF loan revenues are subject to direct or contingent intercept by the State. The PPRF receives directly intercepted tax revenues from the Department of Taxation & Revenue equaling loan debt service before tax funds are released to municipalities. Only NMFA can ask the Department of Taxation & Revenue to impose direct intercepts on tax revenues in New Mexico. Schools district General Obligation loans automatically have a contingent intercept through the Department of Finance & Administration.
The PPRF benefits from 11 different pledged revenue sources, 9 of which are directly tax based – see the indentured debt service reserve fund answer.
Strong credit structuring policies have translated into the PPRF never having had a PPRF loan payment default in the PPRF’s history. All PPRF bonds are fixed rate and there are no derivatives. PPRF loans are made on a bond basis and loan pre-payment dates of loans funded by bonds are matched to bond call dates.