CHICAGO --Standard & Poor’s has issued a AA-plus rating to St. Louis Metro transit system’s new combined sales tax lien ahead of a planned $375 million refunding.
The rating agency also placed on positive watch the AA-minus rating assigned to $97 million of debt that will remain outstanding under the agency’s outstanding senior lien. The agency issues under its formal name –the Bi-State Development Agency of the Missouri-Illinois Metropolitan District.
“The CreditWatch action is due to the agency’s plans to refund all other parity debt with series 2013A bond proceeds, which will substantially increase debt service coverage of the series 2009 bonds, and close the lien,” said Standard & Poor’s analyst John Kenward.
The AA-plus rating was assigned to what the agency now calls its combined-lien. The rating reflects a strong and diverse tax base within the city of St. Louis and St. Louis County, strong coverage of maximum annual debt service, and strong legal provisions with a 1.8 times additional bonds test.
The sale of combined lien mass transit sales tax appropriation refunding bonds addresses several challenges straining Metro’s balance sheet while putting it on a more stable fiscal course with its operating fund and preparing it for potential future expansion efforts, officials said.
The deal achieves traditional present value savings of at least 5%, establishes a debt portfolio that for the first time will begin to amortize principal on a 2005 expansion issue, and eliminates market and bank support risks tied to two outstanding floating-rate series.
The bonds are fixed-rate with a final maturity of up to 39 years. The new credit is secured by a senior lien claim on the city’s Proposition M2 one-quarter cent sales tax and the county’s Proposition A one-half cent sales tax along with a subordinate lien claim on the original Proposition M city & county one-fourth cent sales tax.
The new revenues provide sturdy debt service coverage of at least four times in hand under a combined lien.