Moody’s Investors Service recently downgraded Leonard Wood Family Communities LLC’s Series A military housing revenue bonds three notches to Baa1 from A1, and Series B two notches to Baa3 — the lowest investment-grade rating — from Baa1.
The debt was sold in 2005. Moody’s confirmed the Series C rating at Baa3.
“The downgrades are reflective of a debt service reserve invested in a guaranteed investment contract with MBIA Inc., which has been downgraded to Ba3 with a negative outlook,” analysts wrote.
The credit’s ongoing strengths include a strong occupancy rate of 99.3%, debt-service coverage ratios that exceed minimum underwriting standards, and the continuing essentiality of the military base.
Factors that offset the strengths include the investment of the reserve funds in GICs with MBIA. Also, the proportion of new units planned was dramatically reduced with a debt restructuring in 2008, thus reducing the overall competitiveness of the product over the long term, Moody’s wrote.
As of the end of May, renovation and construction was behind schedule. The renovation schedule called for 467 units to be rehabbed, but only 345 have been completed. The project is still expected to be completed on time.
