LOS ANGELES - With a double-notch upgrade from Moody's Investors Service, the California Housing Finance Agency is planning to sell $38 million of revenue bonds next week.
Moody's upgraded CalHFA's multifamily housing revenue bonds, issued under a multifamily III indenture, to A1 from A3, and assigned the ratings to the new bonds.
The bonds are expected to price on Tuesday and will finance three multi-family rehabilitation loans, according to Kenneth Giebel, a CalHFA spokesman.
The loans will be made for the acquisition, rehabilitation, and financing of three multifamily rental developments consisting of a total of approximately 383 dwelling units under the agency's loan program.
The CalHFA is a state agency that makes low-rate loans for rental properties and to first-time homebuyers through the sale of taxable and tax-exempt bonds. The bonds it issues are repaid by revenues generated through mortgage loans, not taxpayer dollars.
"This upgrade is positive news for CalHFA and for our efforts to help finance affordable, multifamily homes in California," said Claudia Cappio, executive director of CalHFA. "This stronger credit rating will provide us with more financing options and lower our future borrowing costs."
The agency has approximately $536 million of parity debt outstanding.
Moody's also assigned a stable outlook, reflecting the expectation that financial performance, asset quality, and cash flow will continue in the near term.
"The A1 rating reflects significant growth in the financial strength of the MFIII indenture, strong performance of the mortgage loans pledged to bond repayment, and performance on stress cash flow projections," Moody's analysts said. "It reflects the general obligation pledge of the agency, although the increased credit strength of the MFIII program makes the need for additional agency support less likely."
The rating is constrained by potential cash flow stress from a high level of variable rate debt and related interest rate swaps, which could lead to scenarios where agency support is required, Moody's said.
Standard & Poor's assigned the bonds a AA rating and stable outlook.
Next week's deal will be structured with serial and term bonds.
Citi is the underwriter, and Orrick, Herrington & Sutcliffe LLP is bond counsel.
