Bangkok--4 Jan--Standard & Poor's
Standard & Poor's Ratings Services raised its 'BBB' underlying rating (SPUR) on Eagle Bend Metropolitan District No. 2, Colo.'s general obligation (GO) bonds to 'A-' from 'BBB' based on continued tax-base growth in addition to strong financial performance, including very strong reserve levels.
Additional key rating factors in Standard & Poor's view include a taxing area located in Aurora (GO debt rating; AA/Stable), which participates in the large and diverse Denver (AAA/Stable) regional economy; strong unrestricted reserves totaling $924,000 at the end of fiscal 2008, or 575% of expenditures; and no additional debt plans at this time.
These strengths are offset in Standard & Poor's opinion by the district's sizeable combined direct and overlapping debt burden.
"The stable outlook reflects our assessment of the district's record of good growth, which has provided additional taxing flexibility and moderated its debt burden," said Standard & Poor's credit analyst Timothy Barrett. "Continued growth could indirectly improve credit quality by increasing taxpayer diversity within the district over time," said Mr. Barrett.
Standard & Poor's believes the district's assumption of operating responsibility for a limited array of services should provide an additional liquidity cushion if the district experiences rising delinquency rates associated with a current housing market downturn.
The bonds are general obligations of the district and are secured by an unlimited ad valorem property tax pledge. Although the series 2005 GO bonds are subordinate to the 2003 and 2004 GO bonds within the trust estate, Standard & Poor's believes that there is not a material distinction between senior and subordinate debt from a credit perspective due to the unlimited tax pledge associated with all of the district's GO obligations. In addition, the subordinate bonds are convertible to parity bonds as soon as all collected revenues, excluding developer fees, equal at least 1.1x maximum annual debt service for 12 consecutive months immediately preceding conversion. Based on scheduled debt service payments and 2010 assessed value (AV), it is estimated the district's AV would need to grow by roughly 15% to allow for the conversion of the series 2005 GO bonds to parity with the series 2003 and 2004 bonds.
The 949-acre Eagle Bend Metropolitan District No. 2 includes a developing, largely age-restricted, gated community located about 25 miles southeast of downtown Denver.
Combined direct and overlapping debt supported by district taxpayers has declined with growth but remains above average in Standard & Poor's opinion, at 6.3% of market value and $11,417 per capita. The district has completed its infrastructure projects and does not expect to issue additional debt going forward.
RELATED RESEARCH
USPF Criteria: "GO Debt," Oct. 12, 2006
USPF Criteria: "Methodology And Assumptions: Rating Unlimited Property Tax Basic Infrastructure Districts," March 17, 2009
Complete ratings information is available to RatingsDirect on the Global Credit Portal subscribers at www.globalcreditportal.com and 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. Use the Ratings search box located in the left column.
Media Contact:
Ana Sandoval, New York (1) 212-438-5095,
[email protected]
Analyst Contacts:
Timothy Barrett, New York (1) 212-438-6327
Lisa Schroeer, Charlottesville (1) 434-220-0892
Key Contacts:
Americas Media Relations: (1) 212-438-6667
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Americas Customer Service: (1) 212-438-7280
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