BRADENTON, Fla. – Municipal bonds issued for Tennessee-based Global Ministries Foundation housing projects could face rating downgrades because of uncertainty related to a federal investigation.

S&P Global Ratings said Tuesday that it placed all 23 of the projects that it rates on CreditWatch with negative implications because of an inquiry by the Housing and Urban Development into 15 federally subsidized properties.

The 15 properties are supported by Section 8 subsidized affordable multifamily rental housing project payments.

The bonds were sold by different conduit issuers in various states, including Tennessee, Alabama, Florida, Indiana, Louisiana, New York, and North Carolina.

S&P also said that one of the 15 subsidized properties – the 256-unit Windsor Cove Project in Orlando, Fla. – received a default notice by HUD during a recent property assessment.

Capital Trust Agency issued $11.25 million of tax exempt and $500,000 of taxable bonds in 2012 for GMF to purchase the low-income apartment complex. The bonds are currently rated BBB by S&P.

In June, the Orlando Sentinel called the Windsor property "blighted" and said numerous code violations had been found.

"In our view, effective ownership and management are essential to an affordable housing program's economic feasibility and sustainability," said analyst Mikiyon Alexander. "The HUD investigation therefore warrants our review of GMF's full portfolio and our assessment of the project owner's overall strategy and management."

In addition to the HUD-subsidized properties, S&P said Tuesday that it also placed ratings on GMF bonds supported by unsubsidized affordable multifamily rental housing projects on CreditWatch negative.

The ratings on all but one of the 23 projects range from A-minus to BB.

S&P assigns a D – its lowest junk rating – to $11.8 million of tax exempt GMF bonds issued by the Memphis Health Educational & Housing Facilities Board in 2011.

Proceeds of the bonds, secured by HUD housing assistance payments, were used to acquire 448 units in the Warren and Tulane Apartment complexes in Memphis.

In February, HUD cut off payments to the Warren/Tulane apartments after finding health and safety violations, resulting in a default under the indenture.

In May, a receiver was appointed to maintain and potentially sell the Memphis properties after the trustee, Bank of New York Mellon, filed a complaint for damages in the United States District Court for the Western District of Tennessee.

With no HUD payments coming in for the Warren/Tulane project, the June 1 bond payment was not made.

S&P said it would continue to monitor and respond to any "significant" developments that occur as a result of HUD's investigation, and noted that its review extends to all of GMF's bond-financed projects.

"If we were to receive confirmation from HUD, GMF, or other reliable sources that any Section 8 properties are at risk of losing their housing assistance payment funding, we would take appropriate rating action on those issues," Alexander said. "Actions could include a downgrade or withdrawal of the ratings."

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