The recently enacted National Defense Authorization Act is a credit positive for privatized military housing project bonds, Moody's Investors Service said in a comment released on Friday.
Moody's said the NDAA, which was signed into law by President Obama on Dec. 23, should help maintain project financial performance because it halts Army troop reductions, increases military pay and doesn't authorize any more military base closures.
The NDAA stopped some base closures the Army had targeted, which could have weakened project occupancy, according to the rating agency.
"The more troops stationed at a military base, the more potential tenants there are for the base's military housing project; ending further troop cuts will help maintain base troop and potential tenant levels," Moody's said in its report.
"Military housing projects have been increasingly relying on unaccompanied military, non-active-military and non-military tenants (so-called 'waterfall tenants') to maintain occupancy, even with current troop levels," Moody's said. "Higher levels of waterfall tenants are credit negative for projects because revenue from waterfall tenants is generally less than that from active-military tenants … This trend has likely been exacerbated by troop cuts to date and should be slowed by stopping further cuts."
Raising pay for the troops will also help project financials, Moody's said.
