Moody's Investors Service said it has downgraded to B1 from Aa1 Sacramento County Housing Authority's multifamily revenue bonds (Verandas Apartments) 2000 Issue H & taxable multifamily housing revenue bonds (Verandas Apartments) 2000 Issue H-T.
This rating action affects $7,675,000 of outstanding debt and concludes the watch list rating action on October 7, 2013.
The B1 rating is based on the current asset-to debt ratio of 99.57%, which is insufficient to pay bondholders in the event of an extraordinary mandatory redemption arising from a full payment on the credit-enhanced mortgage from Fannie Mae.
Events that may trigger an extraordinary mandatory redemption include borrower default on the mortgage and the receipt of insurance proceeds arising from any casualty loss or condemnation award.
If such an event of extraordinary mandatory redemption did occur, bondholders have only the credit-enhanced mortgage and certain funds held by the trustee as security for the bonds. Cash flow projections demonstrate that the asset-to-debt ratio of the bond program will be less than 100% for the life of the transaction.
The bonds are special obligations of the Sacramento County Housing Authority, payable from the mortgage loan revenues from the underlying multifamily housing project, further secured by a Fannie Mae credit enhancement agreement guaranteeing full and timely payment on the mortgage.
