Memphis Sets $99 Million Deal Following Standard & Poor's Upgrade

ATLANTA - Memphis is readying a $99 million deal for next week that comes after a rating upgrade from Standard & Poor's.

The city is selling the Series 2008 general improvement bonds on Wednesday to refund a portion of its outstanding commercial paper. Proceeds will also be used to finance several capital projects.

The bonds will be sold competitively. They will have maturities from 2011 until 2028. Hawkins Delafield & Wood is bond counsel. First Southwest Co. is financial adviser.

Standard & Poor's raised the city to AA from A. It also raised its underlying rating on the Memphis and Shelby County Sports Authority's revenue debt to AA-minus from A-minus.

Fitch Ratings affirmed the A-plus rating it assigns to the city. In addition, Fitch affirmed the rating on the city's approximately $966 million of outstanding general obligation bonds at A-plus and affirmed the A rating on the Sports Authority's $203 of revenue bonds. Fitch's rating on the agency's revenue bonds is based on the city's obligations and Shelby County's obligation to replenish potential debt service reserve fund shortfalls from non-ad valorem revenues, subject to appropriation.

Standard & Poor's analysts explained that when upgrading the authority they took into account the covenant that Memphis and Shelby County had to appropriate sufficient funds.

Standard & Poor's raised its underlying rating based on Memphis' and the Sports Authority's ability to replenish the authority's debt service reserve. This was based on the authority's non-ad valorem general fund revenues that were used in the event its pledged revenues were insufficient to make debt service payments on the senior-lien bonds.

The bonds also will fund construction at FedEx Forum in downtown Memphis. The National Basketball Association's Memphis Grizzlies franchise calls the arena home, and the arena serves as a venue for other public entertainment events.

Pledged revenues include seat rental fees, a partial rebate of both the state and local option portions of the sales tax collected at arena events, car rental surcharges, citywide and countywide hotel and motel taxes, and a payment in lieu of taxes from Memphis Light, Gas and Water's water division, as noted by Standard & Poor's in their press release on the upgrade.

The agency said that coverage from available revenues has provided at least 1.0 times the required principal and interest payments in every year, precluding any draw on the debt service reserve.

 

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