DALLAS — Assured Guaranty Municipal Corp. may have to cover debt service payments of $1.2 million for a northern Colorado municipal district that defaulted on $25 million of bonds last December, the district indicated.
Assured has already covered the $631,000 of debt service that the Poudre Tech Metropolitan District missed Dec. 1, according to Standard & Poor’s.
S&P lowered its underlying rating on the district six notches to D from A-minus on Thursday.
The district, which adjoins the town of Windsor in Weld County north of Denver, said its general fund balance became negative after an accounting error was detected, according to Standard & Poor’s analyst Bryan Moore.
Assured, which provides an S&P rating of AA-minus, paid $631,000 toward the debt service after the trustee for bondholders filed a claim Oct. 25.
“The district recently informed us that it miscalculated its debt-service mill levy, resulting in inadequate pledged revenues to support debt service due Dec. 1, 2011,” Moore wrote.
Assured is expected to make this year’s June 1 and Dec. 1 payments because the district does not expect to be able to raise the mill levy until December, officials indicated.
After correcting the accounting error, the district’s general fund balance fell to a negative $25,345 from the previous positive balance of $514,905, according to Moore.
The next debt service payment of $605,625 is due on June 1, 2012. However, according to the indenture, Assured is required to be paid first with incoming pledged revenue.
The bonds, issued as $18 million of 2010 Series A and $7.3 million of Series B were part of a refinancing underwritten by George K. Baum & Co.
The 30-year fixed-rate bonds earned a net interest cost of 4.74% initially, with no debt-service reserve fund. In the most recent trade, this month, the 5% coupons in Series A yielded 3.24% or 26 basis points above the Municipal Market Data average.
The district covers 1,700 acres, 1,200 homes and a golf course.