Flat Rock Community Schools, Mich., Downgraded to A2 by Moody's

Moody's Investors Service said it has downgraded to A2 from A1 the underlying rating on Flat Rock Community Schools, Mich.'s outstanding general obligation debt.

The A2 underlying rating has been assigned to the district's 2013 refunding bonds (general obligation unlimited tax).

Moody's has also assigned a Aa2 enhanced rating with stable outlook to the bonds.

The A2 underlying rating applies to $27.8 million of post-sale general obligation unlimited tax debt. The district also has $703,000 of general obligation limited tax debt outstanding that is not rated by Moody's.

Debt service on the current bonds is secured by the district's general obligation unlimited tax pledge. Proceeds will be used to refund the district's outstanding Series 2003 general obligation bonds for expected interest savings.

The downgrade to the A2 rating primarily reflects the district's very narrow general fund balance that is expected to decline further in the current fiscal year. Also incorporated into the rating is the district's modestly-sized and depreciated tax base located southeast of Detroit (GO rated Caa1/negative outlook), sound demographic profile that includes continued population growth, stable enrollment trend, and elevated direct debt burden.

Assignment of the Aa2 enhanced rating with stable outlook is due to the additional security provided by the state of Michigan's School Bond Qualification and Loan Program. The Michigan Department of Treasury is expected to grant final qualification status to the district's bonds following the sale.

 

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