Vegas Monorail Drops a Notch

Moody’s Investors Service Wednesday gave the troubled Las Vegas Monorail project another debt downgrade, to Ca from Caa2.

The action affects the underlying rating of about $439 million of  first-tier series revenue bonds issued for the monorail project through the Nevada Department of Business and Industry.

The four-mile long monorail connecting some Las Vegas strip hotels suffered a series of mechanical glitches after it opened in 2004, then failed to attract expected ridership.

This week’s downgrade, Moody’s said, reflects the likelihood that trustee Wells Fargo Bank NA will deplete the debt service reserve fund by July, forcing it to turn to Ambac Assurance Corp. to cover the remaining shortfall.

Ambac, in turn, carries a junk Ba3 rating from Moody’s.

“Bondholders are exposed to a significant loss in principal,” Moody’s said in its news release.

Ridership and revenue on the monorail line are down this year, reflecting a general decline in Las Vegas visitors.

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Transportation industry
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