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Parkway East Pub Imp Dist _ Madison Cnty 2014 Review 3-27- S&P

Parkway East Pub Imp Dist _ Madison Cnty 2014 Review 3-27- S&P

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Published by the kingfish
S&P press release on rating outlook for Parkway East bonds
S&P press release on rating outlook for Parkway East bonds

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Published by: the kingfish on Mar 31, 2014
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03/31/2014

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Summary:
Parkway East Public ImprovementDistrict, MississippiMadison County; General Obligation
Primary Credit Analyst:
Kate Choban, Dallas (1) 214-871-1420; kate.choban@standardandpoors.com
Secondary Contact:
Horacio G Aldrete-Sanchez, Dallas (1) 214-871-1426; horacio.aldrete@standardandpoors.com
Table Of Contents
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Summary:
Parkway East Public Improvement District,MississippiMadison County; General Obligation
Credit Profile
Parkway East Pub Imp Dist, Mississippi
Madison Cnty, Mississippi
Parkway East Pub Imp Dist (Madison Cnty)
Unenhanced Rating 
 CCC(SPUR)/Negative Downgraded
Many issues are enhanced by bond insurance.
Rationale
Standard & Poor's Ratings Services lowered its underlying rating (SPUR) to 'CCC' from 'BBB' on Madison County,Miss.'s series 2005 special assessment bonds, issued by Parkway East Public Improvement District, and removed therating from CreditWatch with negative implications. The outlook is negative. The lowered ratings reflect our view thatthe lack shortfall of pledged revenues, combined with the county's lack of willingness to contribute toward deficienciesin revenues, could lead to a furthering downgrade of the rating, or a potential default, within the next year.The rating reflects the moral obligation pledge of the county and the contribution agreement, and subsequent support, between the district and the county. The lowered rating and negative outlook reflects the recent deficiencies in districtrevenues to cover debt service, and our view of the potential willingness of the county to opt out of additionalcontributions toward the district, given the terms of the contribution agreement.The bonds issued by the Parkway East Public Improvement District were originally issued for infrastructureimprovements in an unincorporated portion of the county. Special assessments will be levied against the property inthe district; however, should the assessments collected be insufficient for debt service, provisions within the indentureand the contribution agreement will be enacted and the county will transfer funds to satisfy the deficiency, or any debtservice reserve deficiency, should the debt service reserve be utilized. The district further agrees to provide fullreimbursement to the county, no later than two years from the date the deficient debt service payment is made, for theamounts the county provides to the trustee, regardless of the source of the district's funds to pay such reimbursement.Under the terms of the contribution agreement, the county does not have to continue making up district deficienciesshould the district not perform any of the covenants or obligations of the agreement, which we consider a possibility.Under the contribution agreement, the county has agreed to advance to the paying agent the outstanding amountrequired to satisfy any potential debt service reserve deficiencies. According to the trust indenture, the county will benotified no later than 20 days prior to the next principal or interest payment date should there be a deficiency in thespecial assessments collected by the district. Section 6.03 of the trust indenture states that the trustee is authorized and
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directed to establish a revenue fund into which the trustee shall immediately deposit any and all special assessmentsreceived from the levy on district lands. In addition, Section 6.04 of the trust indenture outlines the creation and use of a debt service fund, which includes an interest account, a principal account, and a sinking fund account. Section 6.05outlines the creation of a debt service reserve fund, which according to the prioritization in the trust indenture, thetrustee shall transfer amounts on deposit in the revenue fund first into the interest account, then into the principalaccount, then to the debt service fund, and finally any excess money into the debt service reserve fund. Whenever forany reason on an interest payment date, a principal payment date, a sinking fund payment date or mandatoryredemption date, after taking into account the amount of any county contribution, the amount in the interest account,the principal account, or the sinking fund account is insufficient to pay all amounts payable on such bonds, the trusteeshall, without further instructions, transfer the amount of any such deficiency from the debt service reserve fund intothe interest account, the principal account and the sinking fund account, with priority to the interest account and then,proportionately according to the respective deficiencies therein, to the principal account and the sinking fund account,to be applied to pay any deficient amount of the debt service requirement for the bonds.On Nov. 1, 2013, a notice to bondholders was filed stating that the trustee notified the Board of Supervisors of MadisonCounty of a shortfall in pledged revenues to pay interest on the series 2005 bonds on the Nov. 1 payment date andrequested payment under the contribution agreement, which provides for the county's contribution to fulfill anyunderfunded debt service payment due on the series 2005 bonds. As of March 6, 2014, the county has not providedfunds to cover the shortfall on the series 2005 bonds. The last payment received by the trustee by the county was inthe amount of $676,514.19 on April 18, 2013 in anticipation of the May 1, 2013 debt service payment due date.Therefore, on Nov. 1, 2013 and in accordance with section 6.05c of the trust indenture, the trustee transferred$501,788.81 from the debt service reserve fund to the series 2005 debt service (interest) account to cover the shortfallon the series 2005 bonds. Pursuant to Section 14.11 of the indenture, any withdrawal from the debt service reservefund is required to be replenished in 12 equal monthly payments immediately succeeding such withdrawal, but to datethe county has not replenished these amounts.As of March 3, 2014, the market value of the debt service reserve fund was $1,429,933 and the balance of the revenuefund (as of March 11, 2014) was $558,065.76. This totals $1,987,998.76 currently available for the next debt servicepayment due on May 1, 2014 in the amount of $1,441,803.13. Assuming the county continues to not make any furthercontributions to deficiencies in special assessment revenues, as has been the case since April 2013, and assuming thetrustee must continue to use only the currently available amounts in the revenue and debt service reserve funds, theMay 2014 debt service payment of $1,441,803.13 (principal and interest) and the Nov. 1, 2014 interest payment of $484,178.13 can be covered, but there will not be enough money left in the accounts to pay principal or interest on theseries 2005 bonds past Nov. 1, 2014. While the default on the series 2005 bonds has not yet occurred, we feel that theability and willingness of the county to not reimburse the revenue or debt service reserve funds, or to cover the currentand future shortfalls, based on the contribution agreement, could cause a default on the bonds within the next ninemonths.The district issued special assessment bonds in 2005 and parity bonds in 2008. On Nov. 1, 2013, the trustee gavenotice to all owners that there was a default in the payment of interest on the series 2008A bonds on May 1, 2012, andagain on Nov. 1, 2012, as there were insufficient funds available to make a full principal payment on those dates. On
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Summary: Parkway East Public Improvement District, Mississippi Madison County; General Obligation

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