Bangkok--17 Mar--Standard & Poor's
Standard & Poor's Ratings Services removed its 'A' rating and underlying rating (SPUR) from CreditWatch with negative implications on Reno, Nev.'s general obligation (GO) bonds, where they had been placed on Aug. 25, 2010. At the same time, Standard & Poor's affirmed the 'A' rating and SPUR and assigned a negative outlook to the ratings.
"The removal of the CreditWatch is due to our view of the City of Reno's entering into the fifth forbearance agreement with DEPFA and making advance payments on debt service through the end of fiscal 2012," said Standard & Poor's credit analyst Bryan Moore.
The City of Reno owns a parcel of land that, through a ground lease, Fitzgerald Reno Inc. (Fitzgerald Gambling Corporation) leased in order to construct and operate a parking structure. The city leveraged the lease revenues from the ground lease by privately placing a $6.1 million variable-rate revenue bond with DEPFA bank.
In October 2009, the lessee ceased making lease payments to the city due to financial difficulties, according to management. Although the city has continued to make debt service payments from funds on hand in the revenue fund, according to the ground lease, the lack of payment by the lessee could trigger a covenant default on the bonds; however, the city then entered a forbearance agreement with DEPFA to delay acceleration, which expired on Sept. 16, 2010. The bond ordinance provides that upon a covenant default and resulting acceleration, only pledged revenues, including amounts in the revenue fund, the bond fund, and the reserve fund shall be used to pay the lease bonds.
Since Aug. 25, 2010, the city has entered into a fifth forbearance agreement with DEPFA that expires on Sept. 16, 2011. In addition, the city has made advance payments on debt service through the end of fiscal 2012. We understand that the city has sent out a default notice to the lessee and is in the process of foreclosing on the property. Management stated that over the course of the current forbearance agreement time frame, the city will be seeking different options to either take ownership of the garage and re-lease it or sell the land and garage.
RELATED CRITERIA AND RESEARCH
USPF Criteria: GO Debt, Oct. 12, 2006
Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column.
Media Contact:
Ana Sandoval, New York (1) 212-438-5095,
[email protected]
Analyst Contacts:
Bryan A Moore, San Francisco (1) 415-371-5077
Lisa Schroeer, Charlottesville (1) 434-220-0892