Bangkok--2 Mar--Standard & Poor's
Standard & Poor's Ratings Services revised its outlook to negative from positive and affirmed its 'AA-' issuer credit rating (ICR), 'AA-' long-term rating, and 'AA-' underlying rating (SPUR) on the California Housing Finance Agency's (CalHFA) outstanding debt.
"The negative outlook reflects our opinion of CalHFA's declining equity and profitability and the financial challenges resulting from its significant use of variable-rate debt," said Standard & Poor's credit analyst Larry Witte. "Also contributing to the negative outlook is our view of the downturn in the California housing market and operational challenges in providing affordable housing financing in a low interest rate environment."
We believe the agency faces multiple challenges given its debt profile, the real estate market, and competition from the general lending market. Should the agency experience higher losses on its loan portfolio, and if the financial environment prolongs the agency's debt restructuring, the rating could be lowered. If the agency succeeds in replacing its counterparties and neutralizes the effects of the real estate market on its loan portfolio, the outlook could be revised to stable.
In fiscal 2008, CalHFA experienced an 84% decline in its net income. This decline was primarily due to a $27 million gain on the sale of a multifamily real estate owned (REO) property in 2007, a 26% decrease in the agency's investment income, and a 7% increase in the agency's interest expenses on bonds. Although CalHFA's profitability trend mirrors that of other HFAs in some respects, we believe the agency's debt composition may stifle profitability ratios. Also during fiscal 2008, the agency continued to diversify its debt component.
Complete ratings information is available to RatingsDirect subscribers at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com; select your preferred country or region, then Ratings in the left navigation bar, followed by Find a Rating.
Media Contact:
Ana Sandoval, New York (1) 212-438-5095, [email protected]
Analyst Contacts:
Lawrence Witte, San Francisco (1) 415-371-5037
Karen Fitzgerald, San Francisco (1) 415-371-5023
Key Contacts:
Americas Media Relations: (1) 212-438-6667
media_ [email protected]
Americas Customer Service: (1) 212-438-7280
[email protected]