NEW YORK - Standard & Poor's Ratings Services said it has raised its rating to AAA from BB on the Louisiana Housing Finance Agency, La.'s (Sunquest Properties, Inc.) series 2005 –multifamily housing revenue bonds (Peppermill I and II Apartments Project) and removed them from CreditWatch.
The rating reflects cash flows showing timely payment of principal and interest on the bonds until maturity, assuming no reinvestment earnings on the bond fund; the extremely high credit quality of the assets, consisting of a Fannie Mae mortgage backed security; and investments held in a AAAm rated money market fund.
"Standard & Poor's has analyzed updated cash flow statements, based on a zero reinvestment assumption for all scenarios as set forth in the related criteria articles. We believe the bonds are able to meet all costs from transaction cash flows for the term of the bonds," stated credit analyst Wendy Dolber.
On March 10, 2010, Standard & Poor's lowered the rating to BB from AAA due to expectations of cash flow insufficiency to pay debt service beyond 2011 and a deteriorating asset-to-liability ratio, based on our minimum reinvestment rates assumptions.
Subsequently, on May 12, 2010, the rating was included in a rating action in which certain housing issues were placed on CreditWatch with negative implications due to a revised methodology for certain federal government-enhanced housing transactions. This criteria affects government-enhanced housing transactions in which funds are invested in money market funds and other investments with no guaranteed rate of return.
The bond fund for this issue is currently invested in Fidelity Institutional Treasury Portfolio money market fund, rated AAAm.
