Standard & Poor's Ratings Services said it raised its rating on the Indianapolis Local Public Improvement Bond Bank, Ind.'s series 2011D, 2011I, and 2012B bonds (senior obligations) to AA from AA-minus.
The outlook is stable.
"The rating improvement reflects strong revenue performance which continues to support very strong debt service coverage," said Standard & Poor's credit analyst John Sauter.
At the same time, it affirmed its A rating on the bond bank's series 2007C and 2011K bonds (subordinate obligations). The outlook is stable.
The bond bank's series 2011D, 2011I, and 2012B bonds were issued to purchase Marion County Convention and Recreation Facilities Authority's (MCCRFA) series 2011A, 2011B, and 2012A bonds, respectively. The bond bank's series 2011k bonds were issued to purchase the MCCRFA's series 2011A and 1999A bonds.
Payments on the various MCCRFA bonds secure the bond bank bonds. The MCCRFA bonds are secured by lease payments (not subject to annual appropriation) made by the Marion County Capital Improvement Board (MCCIB), as lessee. Lease payments are secured by a mix of hotel/motel taxes, food and beverage taxes and other excise taxes generally levied across Marion County. The bond bank's series 2007C bonds are payable from a contractual undertaking with the MCCIB.
"Both the AA and A ratings reflect a very deep and diverse tax base and generally growing revenues over the last 10 years," said Sauter.
The AA rating also reflects very strong coverage of maximum annual debt service (MADS) and a closed senior-lien on pledged revenues, while the A rating also reflects adequate MADS coverage and an additional bonds test.
An offsetting factor for both ratings is the inherently volatile nature of the various pledged revenues, which are prone to economic sensitivity. However, revenues have performed well since the Great Recession, and only saw a modest decline during that time, a sign of resiliency.
