APPROXIMATELY $1.04 BILLION OF OUTSTANDING DEBT AFFECTED
New York, May 02, 2012 -- Moody's Investors Service has published its new methodology for U.S
public housing authority (PHA) capital fund bonds. In conjunction
with this methodology, Moody's has downgraded 17 PHA capital fund
bond ratings and confirmed one rating at A3, affecting an aggregate
$1.04 billion of outstanding debt. The new ratings
range from a high of A1 to a low of Baa3. The outlooks of all PHA
capital fund bonds are revised to negative.
The new methodology incorporates market feedback received from our Request
for Comment on Proposed Change to Public Housing Authority Capital Fund
Bonds Methodology, published on February 8, 2011. The
methodology replaces the methodology Update on Moody's Approach
to Rating Public Housing Authority Capital Grant Anticipation Bonds,
published August 2001 and reflects the PHA capital fund bond's ability
to withstand future declines in federal funding.
RATING RATIONALE
The current ratings are largely derived from the maximum annual debt service
(MADS) coverage of the bonds provided by HUD's most recent allocation
of the capital fund. The negative outlooks reflect these bonds'
linkage to the rating of the US government, currently rated Aaa
with a negative outlook, and the continued pressure on the federal
budget which may result in further declines in capital fund appropriations.
From 2001 through 2012, federal funding for the PHA capital fund
declined substantially from $2.99 billion to $1.88
billion, a cumulative decrease of 37.4%. While
the historical compound annual decline from 2001 through 2012 has been
4.2%, we have seen more severe declines in the past
two years, when capital funding was reduced by 18.2%
and 8.3%, in 2011 and 2012 respectively.
The decrease in appropriation for the PHA capital fund has had a direct
impact on the debt service coverage levels, and therefore the credit
quality, of PHA capital fund bond programs. In 2011,
all 18 rated bond programs experienced a significant decline in funding.
The median MADS coverage ratio for rated programs has declined to 2.84x
(most recent annual capital fund appropriations equals 284% of
debt service), as compared to 3.37x when the bonds were issued.
The lowest coverage level of 1.91x in 2011 declined 13.6%
from 2.21x coverage in 2010 and 26.8% from 3.02x
coverage at bond issuance.
The current ratings are based on current and expected MADS coverage levels
provided by the capital fund allocations received from HUD. Other
credit factors particularly affect the credit risk of two bond programs,
which are reflected in their ratings. The Industrial Development
Board of the City of New Orleans, LA implemented an additional bonds
test of 2.5x with the issuance of their Series A bonds, which
allows the PHA to leverage a larger proportion of federal capital funds
than other rated PHAs. Alabama Public Housing Authorities Capital
Program Revenue Bonds, Series 2003-A was financed with a
term of 10 years.
Our calculations for MADS coverage are provided in the list below.
1) $2,825,000 of Alabama Public Housing Authorities
Capital Program Revenue Bonds, Series 2003-A downgraded to
A1 from Aa2; Moody's calculated lowest 2010, 2011,
and 2012 MADS coverage for any member of the pool of 3.24x,
2.76x, and 2.66x, respectively.
2) $78,075,000 of Alabama Public Housing Authorities
Capital Program Revenue Bonds, Series 2003-B downgraded to
Baa2 from Aa3; Moody's calculated lowest 2010, 2011,
and 2012 MADS coverage for any member of the pool of 2.68x,
2.27x, and 2.01x, respectively.
3) $183,500,000 of Chicago Housing Authority Capital
Program Revenue Bonds, IL Capital Program Revenue Refunding Bonds,
Series 2006 downgraded to Baa2 from Aa3; Moody's calculated
2010, and 2011 MADS coverage of 3.08x, and 2.24x
respectively; Moody's projects 2012 MADS coverage of 2.05x
based on the total 2012 capital fund appropriation.
4) $60,210,000 of D.C. HFA - Capital
Fund Program Bonds Capital Program Revenue Bonds, Series 2005 downgraded
to Baa2 from A1; Moody's calculated 2010, and 2011 MADS
coverage of 2.63x, and 2.11x, respectively;
Moody's projects 2012 MADS coverage of 1.94x based on the
total 2012 capital fund appropriation.
5) $12,560,000 of Denver City & County Housing
Authority Capital Fund Program Capital Fund Program Revenue Bonds,
Series 2007 (Three Towers Rehabilitation Project) downgraded to A2 from
Aa3; Moody's calculated 2010, 2011, and 2012 MADS
coverage of 5.16x, 8.56x, and 7.73x,
respectively (a defeasance in 2011 decreased MADS moving forward).
6 )$1,480,000 of East Providence HA-Cap Funds
Housing Rev Bonds Capital Funds Housing Revenue Bonds, Series 2002
downgraded to A3 from Aa3; Moody's calculated 2010, 2011,
and 2012 MADS coverage of 3.40x, 2.92x, and
2.58x, respectively.
7) $14,565,000 of Industrial Development Board of the
City of New Orleans, LA Capital Fund Program Revenue Bonds Series
A of 2003 confirmed A3; Moody's calculated 2010, and
2011 MADS coverage of 6.75x, and 5.58x, respectively;
Moody's projects 2012 MADS coverage of 5.12x based on the
total 2012 capital fund appropriation.
8) $17,200,000 of Knoxville CDC-Capital Program
Revenue Bonds, TN Capital Program Revenue Bonds, Series 2004
downgraded to Baa1 from Aa3; Moody's calculated 2010,
2011, and 2012 MADS coverage of 2.98x, 2.66x,
and 2.49x, respectively.
9) $69,480,000 of Maryland CDA - Capital Fund
Securitization Capital Fund Securitization Revenue Bonds, Series
2003 downgraded to Baa2 from Aa3; Moody's calculated lowest
2010, 2011, and 2012 MADS coverage for any member of the pool
of 2.77x, 2.33x, and 2.10x, respectively.
10) $60,045,000 of New Jersey HMFA-Cap Fund
Program Revenue Bonds 2004 Capital Fund Program Revenue Bonds, Series
2004A downgraded to Baa3 from A2; Moody's calculated lowest
2010, 2011, and 2012 MADS coverage for any member of the pool
of 2.21x, 1.91x, and 1.73x, respectively.
11) $15,980,000 of New Jersey HMFA-Cap Fund
Program Revenue Bds.2007 Capital Fund Program Revenue Bonds,
2007 Series A downgraded to Baa2 from Aa3; Moody's calculated
lowest 2010, 2011, and 2012 MADS coverage for any member of
the pool of 2.94x, 2.40x, and 2.21x,
respectively.
12) $225,410,000 of New York City HDC-Capital
Fund Program Bonds, NY Capital Fund Program Revenue Bonds (New York
City Housing Authority Projects), Series 2005A downgraded to A1
from Aa3; Moody's calculated 2010, 2011, and 2012
MADS coverage of 14.28x, 11.92x, and 11.80x,
respectively.
13) $17,315,000 of Pennsylvania HFA - Cap.
Fund Securitization Capital Fund Securitization Revenue Bonds, Series
2005A downgraded to Baa1 from Aa3; Moody's calculated lowest
2010, 2011, and 2012 MADS coverage for any member of the pool
of 2.89x, 2.48x, and 2.25x, respectively.
14) $93,965,000 of Philadelphia RDA - Capital
Fund Program Rev. Capital Fund Program Revenue Bonds Series A and
B of 2002, and Series C and D of 2003 downgraded to A2 from Aa3;
Moody's calculated 2010, and 2011 MADS coverage of 4.83x,
and 3.77x, respectively; Moody's projects 2012
MADS coverage of 3.46x based on the total 2012 capital fund appropriation.
15) $11,430,000 of Providence Housing Authority Capital
Funds Housing Revenue Capital Fund Housing Revenue Bonds, Series
2001 and Series 2008 downgraded to A3 from Aa3; Moody's calculated
2010, 2011, and 2012 MADS coverage of 3.57x,
3.06x, and 2.98x, respectively.
16) $170,786,000 of Puerto Rico HFA - Capital
Fund Program Bonds Capital Fund Program Bonds Series 2003 downgraded to
A2 from Aa3; Moody's calculated 2010, and 2011 MADS coverage
of 7.53x, and 6.22x; Moody's projects 2012
MADS coverage of 5.71x based on the total 2012 capital fund appropriation.
17) $4,685,000 of Syracuse Housing Authority-Capital
Funds Housing Revenue Bonds NY Capital Funds Housing Revenue Bonds,
Series 2002 downgraded to A2 from Aa3; Moody's calculated 2010,
2011, and 2012 MADS coverage of 6.48x, 5.63x,
and 5.10x, respectively.
18) $1,805,000 of West Haven HA- Cap Funds Housing
Rev Bonds Capital Funds Housing Revenue Bonds, Series 2002 downgraded
to A3 from Aa3; Moody's calculated 2010, 2011,
and 2012 MADS coverage of 3.40x, 3.08x, and
2.74x, respectively.
WHAT COULD CHANGE THE RATING -- UP
- A substantial and sustained increase in the capital fund allocation
received by the respective PHA(s)
WHAT COULD CHANGE THE RATING -- DOWN
- A downgrade of the US government's rating
- A decline in the capital fund allocation received by the respective
PHA(s)
- A significant decline in the number of units per PHA
The principal methodology used in this rating was U.S Public Housing
Authority Capital Bonds published in May 2012. Please see the Credit
Policy page on www.moodys.com for a copy of this methodology.
REGULATORY DISCLOSURES
The Global Scale Credit Ratings on this press release that are issued
by one of Moody's affiliates outside the EU are endorsed by Moody's
Investors Service Ltd., One Canada Square, Canary Wharf,
London E 14 5FA, UK, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that has issued a particular Credit Rating is available on www.moodys.com.
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides relevant regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides relevant regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
Information source used to prepare the rating are the following:
public information.
Moody's considers the quality of information available on the rated
entity, obligation or credit satisfactory for the purposes of issuing
a rating.
Moody's adopts all necessary measures so that the information it
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for information on (A) MCO's major shareholders (above 5%) and
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the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Brendan Weber
Associate Analyst
Public Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Florence Zeman
Senior Managing Director
Public Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody's Investors Service, Inc.
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MOODY'S DOWNGRADES 17 PUBLIC HOUSING AUTHORITY CAPITAL FUND BOND RATINGS; 1 RATING CONFIRMED
