Standard & Poor's Ratings Services said it has lowered its long-term rating on Willacy County Public Facility Corp., Texas' existing debt to BBB from BBB-plus.
The outlook is stable.
"We base the downgrade on our view of the program's contract renewal risk, and the recent action taken by the federal government to terminate a similar project's contract out of convenience," said Standard & Poor's credit analyst Ann Richardson.
In March 2015, the Federal Bureau of Prisons (FBOP) terminated for convenience its contract with Management and Training Corp. (MTC) at the Willacy County Local Government Corp. (LGC). As a result, operations, which derive debt service payments, at the facility have ceased. Given the recent event within Willacy County, which further demonstrates the industry's volatility, the agency now views the renewal and reauthorization risk as weak.
The rating reflects: the correction industry's inherent volatility; the need for the county to contract with federal entities to support the correctional facility; and the potential for demand to fluctuate.
Sufficiently mitigating these negative factors are: the facility's stable operating and financial history due to stable occupancy levels; good debt service coverage (DSC); and a renewed contract with the United States Marshall Service (USMS).
