Standard & Poor's Ratings Services said it lowered its rating on Mammoth Lakes, Calif.'s series 2000 certificates of participation (COPs) to C from BB. The outlook is stable.
"The C rating reflects our view of the town's decision to file for bankruptcy protection under Chapter 9 of the U.S. Bankruptcy Code," said Standard & Poor's credit analyst Sussan Corson.
Mammoth Lakes' next lease payment, which underlies the series 2000 COPs, is due Nov. 15, 2012, for a Dec. 1, 2012, debt service payment; the annual debt service on the series 2000 certificates is about $200,000, or 1.2% of the town's general fund expenditures, and is paid semi-annually on June 1 and Dec. 1.
Town officials report the series 2000 COPs' debt service reserve is fully funded in cash; however, they do not expect to rely on debt service reserves for certificate payment. According to town officials, Mammoth Lakes has included the series 2000 certificates payment in the fiscal 2013 budget and intends to continue to budget and appropriate for these obligations.
Officials report that, after discussions with the trustee, they do not intend to extend the term or restructure payments on the certificates. Notwithstanding the above, however, S&P said it is unsure how the bankruptcy filing may affect future debt service payments.
Mammoth Lakes' town council decided to file for bankruptcy after failed mediation with its largest creditor. Standard & Poor's understands that the first hearing in front of the bankruptcy judge will take place on July 12, 2012.
The stable outlook reflects Mammoth Lakes' inclusion of the certificates payment in its fiscal 2013 budget despite its filing for bankruptcy protection under Chapter 9. Due to the town's budgeting for lease payments and its stated intention to continue to pay on the COPs, S&P said it doesn't expect to change the rating in the next year; however, it could lower the rating if the town fails to pay debt service on the COPs from its available resources or from the reserve fund.