Affordable Housing America Inc., GA Bond Rating Lowered To #CCC# From #BBB# On Deteriorating Financial Performance

Stocks and Financial Services Press Releases Friday June 1, 2018 09:13
SAN FRANCISCO--1 Jun--S&P Global Ratings

SAN FRANCISCO (S&P Global Ratings) May 31, 2018--S&P Global Ratings lowered its rating to 'CCC' from 'BBB' on the Port of Greater Cincinnati Development Authority, Ohio's multifamily housing revenue bonds (AHA – Colonial Village/Athens Gardens Project), series 2015A and 2015 A-T, issued on behalf of Affordable Housing America Inc., Ga., for the Athens Gardens and Colonial Village Project (Athens/Colonial). The outlook is negative.

"The downgrade reflects our view of the project's deteriorating financial performance, evidenced by two consecutive years of maximum annual debt service below 1.0x; highly vulnerable operations, due to continued poor economic occupancy levels; and failure to meet the coverage test, per the bond documents, resulting in possible covenant violations," said S&P Global Ratings credit analyst Jose Cruz.

The rating also reflects our view of the likelihood of default over the next 12 months without an unforeseen positive development. Although the trustee, Wilmington Trust, confirmed that there would be sufficient funds in the debt service accounts to fulfill the June 1, 2018, debt service payment (which is the maximum debt service payment of the bonds), interim financials for fiscal 2018 indicate that maximum annual debt service (MADS) could remain below 1.0x, boosting the likelihood of default over the next 12 months. Furthermore, due to two years of MADS below 1.0x, the project fails to meet the coverage test, per the bond documents, of 1.0x to 1.2x, resulting in possible violations of financial covenants.

The negative outlook reflects our opinion of the highly vulnerable operations of the project. Due to the extremely high vacancy rate, we expect that the project's financial performance will remain highly vulnerable. We also view an increased risk in default over the next 12 months because interim financials project continued poor financial performance.

We could lower the rating should a default, a distressed exchange, or a redemption appear to be inevitable within six months, absent unanticipated significantly favorable changes in the project's circumstances. Furthermore, we would also lower the rating on the occurrence of a draw on the debt service reserve fund.

We could raise the rating if the occupancy rate improves, resulting in improved debt service coverage of at least 1.0x for two consecutive years.

Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at www.standardandpoors.com for further information. Complete ratings information is available to subscribers of RatingsDirect at www.capitaliq.com. All ratings affected by this rating action can be found on S&P Global Ratings' public website at www.standardandpoors.com. Use the Ratings search box located in the left column.


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