DALLAS — The U.S. Army's plan to reduce forces by 40,000 soldiers may become a long-term risk for military housing bonds, though ratings should suffer no immediate impact, according to a July 15 report from Fitch Ratings.
"Changes of this magnitude are unlikely to affect Fitch's MHB ratings in the short run," Fitch analysts Maura McGuigan and Rob Rowan said of the 8% reductions over three years.
Taxable bonds issued for the housing projects "also limit the risks as privatized military housing projects were sized to meet only one-third of the potential demand for on base housing," the analysts said. "And, some transactions benefit from an end-state number of units that already reduced housing stock at those bases."
Fitch has about 27 public ratings totaling $3.5 billion in outstanding military housing bonds through 13 transactions, the report said.
Only four of those transactions will involve bases that will see about 5% to 6% of their ranks, analysts said.
"However, we expect cuts to continue into the longer term," the report added. "Their magnitude could compound over time and put some military housing bonds under pressure."
In March the US Department of Defense requested another round of Base Realignment and Closure. More than 350 installations have been closed in previous BRAC rounds, beginning in 1988.
