Antelope Valley Healthcare District
Moved to "Stable" by Moody's on Better Fiscal Results
(Apr.
17) -- The Antelope Valley Healthcare District, which is at the
lowest investment grade (Baa3) on $109 million of revenue bonds, received
some good news. Moody's has changed the outlook to "stable" from "negative"
after "operating results improved significantly in the second half of FY
2008 and in interim FY 2009." A new senior management team improved cash
flow margins as part of a turnaround plan, Moody's said.
San Diego's Sewer Revenue Bond Will
Include a Second Offering If You Miss First One
(Apr.
16) -- Elsewhere we highlighted Fitch's four-notch upgrade of San
Diego's sewer revenue bonds to AA-. Standard & Poor's now has rated the
upcoming deal A+. Beside the $458 million Series 2009A issue we highlighted,
S&P notes that the city's financing authority also will sell more than $400
million of Series 2009B sewer revenue bonds to refinance existing debt. We
expect that deal to price a bit later than the 2009A bonds.
California Rural Home Authority
Bonds (2006 FH-1) Downgraded to B from BBB+ by S&P
(Apr.
15) -- S&P lowered Calif. Rural Home Mortgage Finance Authority's
(CRHMFA) Homebuyer Fund senior and subordinate bonds, series 2006 FH-1 to B from BBB+,
with a "stable" outlook. The "poor performance of the loans," with 34% more
than 60 days delinquent or in foreclosure, and the pool's small size spurred
the cut, S&P said. Radian Guaranty supports the pool and its recent
downgrade also had a big impact for these bonds.
California's Taxable Sale Might
Be $5 Billion, Including $3.5 Billion of "Build America Bonds"
(Apr.
15) -- California looks to sell $5 billion of taxable bonds, based on an
"A" rating report by S&P. About $3.5 billion may be taxable Build America Bonds, a federal plan
letting the state either give investors a tax credit or take a
cash rebate equal to 35% of interest paid. The state will take the
cash. The taxable deal might make sense for a state starved for
buyers, but our April print edition explains why
small investors can pass.
Moody's Hikes Farmersville School
Bonds to Baa2, Up from Lowest Investment-Grade Level
(Apr.
14) -- Moody's Investors Service upgraded Farmersville Unified
School District general obligation bonds to Baa2 from Baa3, putting them a
notch above the lowest investment-grade level. The district, 50 miles
southeast of Fresno, has a relatively small tax base. Nevertheless, the
district has shown operating surpluses for the two-year period ended in
fiscal 2008 and has a "moderate debt burden" for its tax base, Moody's said.
Moody's Lowers Bond Insurer Ambac
to Ba3, a Five-Notch Downgrade from Baa1
(Apr.
13) --
Moody's Investors Service downgraded Ambac Assurance Corp. to Ba3 from Baa1,
citing continued losses on mortgage-related securities. The "claims-paying
resources of Ambac remain above Moody's expected loss estimates for the
firm," but financial cushions have eroded, Moody's said. Virtually all
municipal bonds backed by Ambac carry higher "underlying" ratings and
already trade on their own credit standing.
City of Hope National Medical
Center Bonds Raised to A1 from A3 on "Very Strong" Margins
(Apr.
9) -- Moody's Investors Service upgraded City of Hope National
Medical Center bonds to A1 from A3 thanks to "very strong levels" of
operating margins. The action affects $162 million of Series 1999A bonds
sold through the ABAG Finance Authority for Nonprofit Corps.
There was recently a "very large increase" in unrestricted cash
thanks to a royalty judgment involving Genentech litigation, Moody's said.
Moody's Gives All U.S. Local
Governments a "Negative" Outlook to Reflect Money Pinch
(Apr.
8) -- Moody's Investors Service has given all U.S. cities, counties,
school districts, and certain special districts a "negative" outlook because
of budget struggles in the current economic crunch. This simply means the
credits will be watched closely for how they address current stress through
2010, but doesn't mean widespread downgrades will occur. Water and sewer
revenue bonds are not lumped in with this action.
Agoura Hills Lease-Revenue Bonds
Upgraded to AA+; Local Issuers Keep Hammering State
(Apr.
3) --
If you want more evidence that investors should demand whopping yield
premiums on the looming state Public Works Board lease-revenue bonds,
consider that a much smaller issuer (Agoura Hills) earned an upgrade to AA+
for its financing authority's 2007 lease revenue bonds. That's five notches
higher than the state lease bonds. S&P: Agoura Hills maintains "very strong
available fund balances." Well-run issuers get rewarded.
Fitch: Los Angeles Longer-Term
Outlook to "Negative" from "Stable" On Budget Challenges
(Apr.
1) --
Fitch Ratings changed its longer-term outlook for Los Angeles to "negative"
from "stable" because the city faces "declines in key taxation revenues,"
the rating agency said. An outlook change does not mean a downgrade is
imminent, but it does signal a rating change is possible if current trends
continue. The city's diverse economy and sizable reserves are a strength,
Fitch said. We add that L.A. is a solid double-A credit.
Stockton's Bonds on Watchlist for
Downgrade; Moody's Cites Large Deficit Pressure
(Apr.
1) --
Moody's said it might lower the City of Stockton's ratings because of a $28
million projected deficit in fiscal 2010. The city faces at least a 15% cut
in expenditures and needs labor union concessions, Moody's said. The city's
issuer rating is A2, its lease-revenue bonds are currently rated Baa1, and
its taxable pension obligation bonds, A3. City staff has proposed cutting
200 general fund positions as part of a budget solution.
Los Angeles County MTA Sales Tax
Bonds Upgraded to AA+; Resilience Even in Down Times
(Apr.
1) --
Los Angeles County Metropolitan Transportation Authority sales tax revenue
bonds were upgraded to AA+ from AA by Standard & Poor's. "We expect that
high debt service coverage should protect against expected declines in
pledged revenue through stressful economic cycles," S&P said in a statement.
The size and stability of Los Angeles County's economy is a "key credit
strength" for the sales tax bonds, S&P said.
Berkeley G.O. Bonds Upgraded to One
Notch Below AAA Thanks to Solid Financial Reserves
(Mar.
31) --
Standard & Poor's upgraded the "underlying" rating on Berkeley's
general obligation bonds to AA+, or one notch below triple-A. Maintenance of
"very strong reserve levels" and "proactive" budget management, along with
stability provided by the presence of UC Berkeley, helped raise the rating,
S&P said. The city's lease bonds rose a notch to AA. An "underlying" rating
is the grade that applies in the absence of bond insurance.
S&P "Corrects" Several Ratings; A
Little Confusion Over "Underlying," Insured Ratings
(Mar.
27) --
S&P has just "corrected" ratings applying to some deals, including a few
California Public Works Board bonds. For example, after bond insurer Syncora
tumbled into junk-bond territory S&P should have shown the "underlying" A-
for the credit; it showed the insurer's lower rating instead. S&P also noted
it should have shown Ambac's A rating on some bonds, not the underlying A-.
Actual security for the debt was not the issue.
S&P: "Developing" Outlook on
Children's Hospital and Research Center Oakland
(Mar.
24) --
Standard & Poor's said a rating change "is likely" within a year or
two on bonds for Children's Hospital and Research Center Oakland, but the
direction of the change is "difficult to predict." ABAG issued the revenue
bonds for the hospital. Children's "is in affiliation discussions" with a
highly rated organization that could lift the rating. However, "erratic
operating losses" also could lower the current single-A rating, S&P said.
California, Package-Delivery
Company UPS Now Share Same "Global Scale" Moody's Rating
(Mar.
20) -- On a "global scale" that examines risk of repayment and other
factors, Moody's now ranks State of California
taxable bonds at the same Aa3 level as UPS, the world's biggest package-delivery company. Here's an idea. Let's
have UPS run the state instead of Arnold and the sorry excuse for a
legislature. Then budgets would be "delivered" on time, and UPS/California
would probably live within its means.
Credit Ratings Rise on 28
California Localities; S&P Cites Improved Credit Quality Factors
(Mar.
18) --
Standard & Poor's rewarded 28 California localities with higher credit
ratings for a variety of reasons tied to improved credit quality. A list of
affected localities is provided lower on this page. Other S&P upgrades that
aren't on the list include San Carlos general obligation bonds, which rose
to AA+, just one notch below triple-A, because of "strong fund balances,"
S&P said.
Fitch, Moody's Cut California G.O.
Bonds a Single Notch; Not a Surprise for the Market
(Mar.
19) -- Fitch Ratings and Moody's downgraded California G.O. bonds
one notch (to A from A+ and to A2 from A1), following a similar move by S&P
a few weeks ago. This isn't a surprise given California's continuing mess.
Fitch commended the state for its recent passage of a budget to narrow a
deficit, but noted that the state will continue to face budget and cash flow
stress "going forward." Lease debt also fell one notch.
List of 28 California Localities
Upgraded by S&P; Rating Agency Cites Improved Financials
(Mar. 18) --
This is an alphabetical list of California localities upgraded by S&P:
Albany, Brea, Calabasas, Carlsbad, Claremont, Fontana, Laguna Beach, Los
Altos, Merced County, Norwalk, Pleasant Hill, Pomona, Rancho Cordova,
Redlands, Redondo Beach, Ridgecrest, Rocklin, San Bruno, San Marco, San
Clemente, Santa Clara, Scotts Valley, Shasta County, Tehama County,
Temecula, Vista, West Sacramento and Westlake Village.
S&P Changes Outlook to
"Negative" on Triple-A Caltech, Pending Action to Balance Budget
(Mar.
17) --
"Eroding financial resources" at California Institute of Technology prompted
S&P to change its outlook to "negative" on Caltech's Aaa rating. Further
declines in resources "without adjustments to expenses" could change the
rating, S&P said. The rating agency expects Caltech will "work aggressively"
to address the issue. An outlook change isn't as strong as a
downgrade warning, providing more time for a fix.
Reminder: J. Paul Getty Trust
Tax-exempt Bonds Still Aaa, Even With Investment Losses
(Mar.
16) --
The Los Angeles Times ran a story about investment losses at the J.
Paul Getty Trust (which oversees the famous museum in L.A.). Even if losses
cause unrestricted resources to fall to $3.5 billion, the cushion for $627
million in debt remains "substantial" at 5.6 times, Moody's noted in a
recent report. The Aaa debt has been in variable-rate mode, Moody's noted,
but 2007A bonds convert to long-term mode soon.
S&P Affirms California General
Obligation Bonds at "A," Citing Passage of 2009-10 Budget
(Mar.
11) --
California $45.6 billion of general obligation bonds were affirmed at
single-A by Standard & Poor's. The "adoption of both gap closing measures
and a 2009-2010 budget simultaneously help provide a level of stability
during a difficult economic period," S&P said. The state is still
"vulnerable," S&P added, because voters must approve budget-related measures
in May. S&P downgraded the state by one notch last month.
A Little-Noticed Trend: Older
Municipal Bonds Receiving "New" Underlying Credit Ratings
(Mar. 6) --
The other day Moody's assigned an A2 rating to Modesto Public Financing
Authority 1997 refunding revenue certificates of participation. Why a new
rating on old COPs? The debt was first sold with a guarantee from a bond
insurer that was later downgraded, and the guarantor's rating was withdrawn.
The COPs weren't sold with an underlying rating. The "new" rating confirms
this is a solid investment-grade credit.
Slowing Economy Hits Business at Port of Oakland, Prompts Fitch
Downgrade of Bonds
(Mar. 6)
-- Almost $1 billion of Port of Oakland senior revenue bonds were downgraded
to A+ from AA- by Fitch Ratings because of less airport and marine traffic.
About $500 million of intermediate-lien revenue bonds fell to A from A+. In
calendar 2008 aviation traffic fell 22%, Fitch said, and marine container
activity dropped 6.4%. The Port has made "several large" expense cuts in
response; Fitch kept the longer-term outlook at "negative."
Lake Tahoe School District General Obligation Bonds Upgraded to A2
Before Sale
(Mar. 6)
-- Moody's Investors Service upgraded Lake Tahoe Unified School District
general obligation bonds to A2 from A3 ahead of a planned $30 million debt
sale this month. A diversified tax base experiencing stable growth, even
amid the current housing market weakness, helped prompt the upgrade, Moody's
said. The district also has "generated adequate reserves" as a cushion
against mid-year state funding cuts, Moody's said.
Brethren Hillcrest Homes Bonds (La Verne) Affirmed at BB by S&P
(Feb. 26)
-- Standard & Poor's affirmed its BB rating on $45.5 million bonds issued by
La Verne for Brethren Hillcrest Homes, which operates a continuing-care
retirement facility. Management improvement, better demand, and 2.0 times
adjusted debt service coverage for the fiscal year ended June 30, 2008,
helped keep the rating the same, S&P said. A turnaround plan is helping but
faces pressure with the recession, S&P added.
Scotts Valley Water District's Water and Sewer Revenue Bonds Raised
Three Notches to A+
(Feb. 24) -- Scotts Valley
Water District water and sewer revenue bonds are rated A+ after a
three-notch upgrade from BBB+, Standard & Poor's said. Good debt service
coverage and recent rate hikes helped spur the upgrade, along with ability
to use property tax revenue to keep coverage ratios high, S&P said. S&P is
also raising some muni bond ratings to reflect their low default risk
vis-a-vis other types of bonds.
Rio Hondo , Oroville High School Districts
Upgraded Before Sales
(Feb. 24) -- Rio Hondo
Community College District G.O. bonds were recently upgraded to AA from
AA-minus and Oroville Union High School District G.O. debt was raised to A
from A-minus by Standard & Poor's. Both issuers plan to sell bonds the week
of Feb. 23rd. S&P raised the ratings to reward good financial management.
S&P also is raising some muni bond ratings to reflect their low default risk
vis-a-vis other types of bonds.
Puerto Rico's Luis Munoz Marin Airport Revenue
Bonds Downgraded to BBB- from A-
(Feb. 25) -- Puerto Rico
Ports Authority revenue bonds for the Luis Munoz Marin International Airport
were lowered three notches by Standard & Poor's, which cited less passenger
traffic because of American Airline flight cutbacks and the recession. The
rating fell to BBB- from A- and the outlook is "stable." The change affects
$58.5 million of bonds. Puerto Rican bonds are federally and state
tax-exempt across the entire U.S.
Fitch Ratings Affirms McFarland's
Single-B on 2001 Sewer COPs But Withdraws Rating
(Feb. 23) --
Fitch Ratings affirmed the single-B rating on McFarland's sewer system
Series 2001 COPs, but withdrew the rating over "lack of ongoing disclosure."
The city faces various challenges, such as a limited economy and structural
budget deficits, Fitch said. The city did pass a multiyear rate increase
plan that should provide "adequate" debt service coverage the next few
years, Fitch said, assuming the increase stays in effect. We discuss this
further in the March print edition.
Moody's Withdraws Rating on Series 1998A Pooled College Bonds Over Lack
of Information
(Mar. 2)
-- Moody's Investors Service withdrew its Ba1 rating on California
Educational Facilities Authority Series 1998A Revenue Bonds (The Pooled
College and University Projects) because it doesn't rate the last remaining
participant in the pool, Holy Names University. This would appear to be
simply a "lack of information" decision and shouldn't be a concern for
bondholders.
La-Honda Pescadero School Bonds Downgraded by Fitch as Budget Pressures
Increase
(Feb. 23) -- La Honda - Pescadero Unified School District G.O. bonds
were cut to BBB from A-minus by Fitch. The district still has an adequate
financial cushion, but has faced some challenges with enrollment
fluctuations, Fitch said. (Mar. 6 update): The
district sold almost $3 million of G.O. bonds this week, including a 25-year
maturity that yielded a tax-exempt 6.10%. FSA insured the bonds.
Rohnert Park Sewer Bond Underlying Rating Downgraded; S&P Cites Voter
Cut in Rates
(Feb. 23) -- S&P
cut
the underlying rating on Rohnert Park series
2005 sewer revenue bonds to A-minus from A after voters in November lowered
sewer rates to Jan. 1, 2006, levels. This results in a loss of about
one-third of annual operating revenue, S&P said. These bonds carry a
financial guarantee and remain safe from a payment perspective, but
more downgrades on the "underlying" rating are possible if rates can't be
adjusted.
