Nearly $584 million of Mid-Atlantic Family Communities LLC military housing revenue bonds lost their triple-A rating from Moody’s Investors Service last week, reflecting the deteriorating credit quality of MBIA Insurance Corp. and its public finance subsidiary National Public Finance Guarantee Corp., which backs the debt.
Moody’s downgraded the Series 2005 Class I bonds to Aa3 from Aaa, and the Series 2005 Class III bonds to A3 from A2. The bonds were removed from Moody’s watch list. Standard & Poor’s rates the Class I bonds AA-plus.
Moody’s placed the bonds on review for a possible downgrade last June following the loss of MBIA’s triple-A rating. The new company, which MBIA spun off in February to insure only U.S. public finance debt, is currently rated Baa1 by Moody’s.
The bonds were issued to finance military housing near naval facilities in Virginia and Maryland. Moody’s noted that the housing construction is on schedule and on budget.
Omar Ouzidane, Moody’s primary analyst on the deal, said the bonds’ underlying credit quality remains strong. Debt service is covered 2.8 times for the Class I bonds and 1.45 times for the Class III bonds. Occupancy is strong and the Navy’s allowance for rent encourages families to stay in the provided housing, Ouzidane said.