BRADENTON, Fla. – The bonds of 16 affordable housing properties affiliated with Memphis, Tenn.-based Global Ministries Fellowship were downgraded by S&P Global Ratings amid a potential sale of the assets.
The downgrades sent 14 credits to junk, joining two that were already there.
Prior to the downgrades, the ratings ranged from a high of A-minus to BB. After S&P took action, the ratings range from BB-plus to B-plus.
The bonds were removed from CreditWatch following the downgrades.
The downgrades affect GMF bonds issued by various conduit issuers in Florida, North Carolina, Tennessee, Indiana, Louisiana, and Wisconsin.
Negative outlooks on the debt remain in place due to the uncertainty caused by an ongoing investigation of the GMF by the Department of Housing and Urban Development, as well as maintenance and property management issues experienced at certain properties, said S&P analyst Raymond Kim.
"We have received notification from GMF that it intends to sell its portfolio of Section 8 properties in 2017," Kim said. "We will continue to monitor the properties' financial performance and any significant developments that occur in relation to HUD's investigation of GMF's bond-financed projects."
In a material event notice on EMMA Jan. 17, GMF said that it had executed an agreement with Millennia Housing Development Ltd. to sell 37 of its HUD-assisted properties.
"The proceeds of the proposed sales will be used to pay off all then outstanding debt relating to such properties," the notice said. "All proposed sales would be completed by Dec. 31, 2017 pursuant to the agreement."
The contract signing "in no way guarantees" that the sales will be consummated, GMF said, adding that each property is subject to due diligence and other inspection contingencies, HUD approval, and Millennia obtaining acceptable financing.
Two GMF's properties not among those cited in S&P's report on Monday remain entangled in a federal default-related receivership lawsuit.
The suit, filed May 6 by the bond trustee, Bank of New York Mellon, sought the appointment of a receiver for the Warren and Tulane Apartment complexes in Memphis after a default on bond payments.
Court filings brought to light that the Securities and Exchange Commission had opened an investigation.
The probe pertains to $11.8 million of tax exempt bonds and $485,000 of taxable bonds issued by the Health, Educational and Housing Facility Board of the City of Memphis in 2011.
Proceeds of the bonds, secured by HUD housing assistance payments, were used by GMF to acquire 448 units in the Warren and Tulane Apartment complexes in Memphis.
In a Dec. 8 court filing, a company managing the complexes said that both properties are now vacant.
Many of the court proceedings in the case have been sealed, shielding information from the public.
In June, S&P lowered ratings to D on the bonds issued for the Warren and Tulane Apartment complexes.
