Moody’s Investors Service Tuesday downgraded the underlying rating on bonds issued for the Las Vegas Monorail Corp. to Caa2 from B2, stating that the monorail faces a payment default by 2010 under current trends,
The action affects first-tier project revenue bonds issued in 2000 through the Nevada Department of Business and Industry. Ambac Assurance Corp. wrapped the first-tier bonds. Ambac’s Aaa Moody’s rating is on review for a possible downgrade. It has been downgraded to AA by Fitch Ratings.
In addition to the original $445.8 million first-tier bond issuance, the project was also financed through $146 million of second-tier bonds and $48.5 million of subordinate bonds, all unrated and uninsured.
Ridership and revenue for the nonprofit corporation’s four-mile long monorail line remain significantly below forecasted levels, as they have since the line’s 2004 opening, Moody’s said. The service connects several hotels along the Las Vegas strip.
According to Moody’s, the monorail’s operating revenues, after expenses were covered, were insufficient to cover first- and second-tier debt service payments, and as a result, trustee Wells Fargo Bank NA tapped the debt service reserve funds in January.
The monorail’s low operating revenues mean the monorail operator is unable to comply with the rate covenant agreement, Moody’s said, and all operating cash is under the control of the trustee.
The first-tier bonds have a $40.4 million debt service reserve fund, of which $21 million is in the form of a surety provided by Ambac, according to Moody’s, which continues to assign a negative outlook to the credit.
In July, Fitch downgraded its underlying rating on the monorail revenue bonds to CC from CCC. A CC category rating means that default of some kind appears probable.
