Fitch Ratings last week stripped $40.1 million of Lake of the Ozarks Community Bridge Corp. bonds of their investment-grade status amid management’s refusal to raise tolls.

The refunding revenue bonds were issued in 1998 and most recently carried a BBB-minus rating. Fitch downgraded the debt to junk at BB-plus. The outlook is negative. The agency put the credit on negative watch last August.

The bonds carry a final maturity of December 2026 and are secured by the net revenues of a toll bridge over the Lake of the Ozarks in central Missouri. Fitch attributed the downgrade to bridge management’s reticence to raise tolls even as pledged revenues have been insufficient to pay scheduled principal and interest.

Analysts noted that the nonprofit corporation holds cash on hand sufficient to meet debt service requirements for five years or more, depending on the severity of the current economic downturn. Faced with bond covenant violations, management is using cash on hand to defease some bonds and artificially meet the covenants.

“Fitch does not consider the use of liquidity to prop up legal coverage for such an extended period to be consistent with an investment-grade rating,” analysts wrote.

Traffic on the bridge consists of 98% cars and is highly seasonal and dependent on vacation travelers. Traffic in November, December, and January declined 19%, 12%, and 17% compared with the same months a year earlier.

The bridge opened in 1998 with traffic levels 30% below initial forecasts. Car tolls in each direction were set at $2.50 in the summer and $1.50 in the off-season. Lake of the Ozarks is a man-made lake created by the damming of the Osage River, and the half-mile bridge reduces driving time around the lake by up to one hour.

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