Standard & Poor’s this week knocked the Detroit Local Development Finance Authority’s tax increment financing bonds Series 1997B and C and 1998A further into junk bond territory due to “significant uncertainty” over the future of a Chrysler plant that makes up most of the taxable value of the district.

The agency lowered the rating on the Series 1997B to B from BB and downgraded the 1997C and 1998A bonds to B-minus from BB-minus. The ratings were also placed on negative watch.

“The speculative-grade ratings reflect our assessment of the concentration of the property tax base in one taxpayer with more than 95% of the taxable value of the project area in one auto assembly plant,” said Standard & Poor’s analyst Jane Hudson Ridley. Other negative factors include low coverage of just 1.2 times over the life of the bonds and the long-term final maturity in 2021.

The Jefferson Avenue North plant is among the assets that Chrysler sold to Fiat as part of the automaker’s recent bankruptcy. The role of the plant in the new company — now Chrysler Group LLC — is uncertain, analysts wrote.

Offsetting factors include the demonstrated importance of the facility to Fiat. The plant was Chrysler’s only North American assembly plant building the Jeep Grand Cherokee sport utility vehicle. The bonds also benefit from adequate debt service coverage in fiscal 2008 of 2.6 times for senior-lien bonds and 1.6 times overall for all debt.

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