LOS ANGELES — Moody’s Investors Service changed the outlook on debt issued for Stockton Calif.’s two Mello-Roos districts to stable from developing and affirmed the underlying Baa2 ratings on the two series rated by the agency.
The change applies to bonds for Community Facilities District No. 1, Weston Ranch, special tax refunding bonds series 2006 and Community Facilities District No. 90-2, Brookside Estates, 2005 special tax refunding bonds.
Moody’s analysts said in a report Oct. 15 the rating action on these Mello-Roos districts’ special tax bonds reflects the proposed treatment of these bonds’ creditors in the city’s plan of adjustment adopted on October 3, 2013.
The ratings change was based on an expectation that the plan’s treatment of the special tax bonds will probably remain unchallenged throughout the remainder of the bankruptcy, according to the report.
The plan defines the pledges securing the bonds as “special revenues,” which cannot be used for any purpose other than to pay bondholders. The plan calls for a continuation of payments from the pledged special taxes to bondholders.
The districts are separate legal entities, but the city levies and receives the special taxes, which are collected by the county. Moody’s analysts said they believe that the probability that the city or bankruptcy court will modify the proposed course of action is low given that the city has not defaulted on payment of these bonds, that the districts are legally distinct from the city, and that no other party has objected to the city’s treatment of the pledge during the bankruptcy.
