Standard & Poor's Ratings Services lowered its underlying rating (SPUR) on Knox Hills LLC, Ky.'s series 2007 class I bonds to A-plus from AA-minus and affirmed its A-minus rating on the class II bonds issued on behalf of the Fort Knox Military Housing Privatization project.
The outlook is negative.
The rating reflects the following project weaknesses : the lower than projected debt service coverage (DSC) of 1.66x and 1.51x maximum annual debt service (MADS) on the class I and class II bonds, respectively, in fiscal 2014, based on owner provided financial statements as of June 2014; the debt service reserve fund (DSRF) in the form of a surety policy from unrated provider; the reduction in troops assigned to Ft. Knox, resulting in very low occupancy of 70% as of October 2014; the scheduled 12% increase in debt service expense in 2015; and the decline in average basic allowance for housing by 2% at the base in 2014.
