Thursday, January 14, 2010

Metro on Negative Rating Watch reflecting "fiscal strains" of Music City Center

From Business Wire:
Fitch Ratings takes the following action on the Metropolitan Government of Nashville and Davidson County, Tennessee (Metro) as part of its continuous surveillance effort:

--approximately $1.6 billion general obligation (GO) bonds, rated 'AA', placed on Rating Watch Negative;

--approximately $71 million district energy system bonds rated 'AA-', placed on Rating Watch Negative.


--The Negative Rating Watch reflects the potential additional fiscal strains of a planned $638 million debt-financed convention center upon an already pressured general fund beset by slim reserve levels, significant long-term liabilities and constrained revenue-raising ability.

--Long-term financial pressures include a voter-approved charter amendment that limits Metro's ability to increase its millage as well as sizable pension and OPEB liabilities in comparison to its operating profile.

--Metro's diverse, stable, economic base, anchored by health care, professional and business services, and tourism, has solidified its position as a vital regional center.

--Debt levels, including the upcoming convention center financing, are above average, while amortization is below average.


--Issuance of convention center debt secured by a back-up pledge of non-tax general fund revenues could result in a minor downward adjustment to the rating, assuming the constancy of other credit factors.
A negative rating means that Metro's bonds are likely to be downgraded, in this case because of the strains a debt-financed Music City Center would put on the general funds in the Metro budget. If Metro bonds are downgraded their value drops and investors demand higher yields from them.

No comments:

Post a Comment