Fitch Ratings yesterday put bonds that financed part of the expansion of the Carousel Center Mall in Syracuse, N.Y., on negative watch, citing declines in pledged revenues. The Syracuse Industrial Development Agency issued $228.1 million of tax-exempt bonds and $97.6 million taxable bonds backed by payments in lieu of taxes in 2007. Fitch rates the two series of bonds an underlying AA-minus.
A guaranteed investment contract with XL Asset Funding Co. was projected to yield approximately 4.9% annually on debt service reserve funds but that contract has been terminated, a Fitch report said. Several bankruptcies have also led some of the mall’s tenants to terminate their leases while some other tenants are delinquent on their PILOT payments, Fitch said.
“Pledged revenue is now likely to be insufficient to fully cover debt service as the level of interest earnings on the Series A reserve fund has declined significantly in the current low interest-rate environment,” Fitch said.
Fitch said the negative watch is expected to be “resolved in the near term pending the receipt and analysis of additional information from the issuer.”
The bonds were issued on behalf of Destiny USA Holdings LLC, a subsidiary of Pyramid Cos., to finance the first phase of a planned $2.23 billion expansion and transformation of the mall into a resort called DestiNY USA.
Moody’s Investors Service and Standard & Poor’s rate the bonds Baa3 and BBB-minus on their respective global scales.