Trophy Club Public Improvement District No. 1, TX Debt Rating Raised To #BBB# On Updated Methodology

Stocks and Financial Services Press Releases Thursday June 21, 2018 11:00
CHICAGO--21 Jun--S&P Global Ratings

CHICAGO (S&P Global Ratings) June 20, 2018--S&P Global Ratings raised its underlying rating (SPUR), on Trophy Club Public Improvement District (PID) No. 1, Texas' special assessment revenue refunding debt, issued for Trophy Club Town, to 'BBB' from 'BBB-'. The outlook is stable.

The rating action reflects the application of our updated methodology "Special Assessment Debt," published April 2, 2018, on RatingsDirect.

"The stable outlook reflects our expectation that the local economy and real estate market will remain stable," said S&P Global Ratings credit analyst Daniel Hughes. "In addition, we expect assessments to be sufficient to pay debt service on the bonds, and delinquencies in the assessment area to remain low."

The bonds are secured by pledged revenues consisting of special assessments levied against certain parcels of land within the PID, which are levied in accordance with the Town of Trophy Club's Service and Assessment plan. Pursuant to the service-and-assessment plan, annual assessments will not exceed the amount required to pay debt service and collections. It is the PID's practice and intent to levy a special assessment that generates approximately 1x annual debt service coverage and an additional 5% for administrative and collection costs.

Under the indenture, in the event of delinquencies, the PID could use its debt service reserve fund or prepayment-delinquency fund to pay annual debt service. We understand the indenture does not allow for the increase of annual assessments to replenish reserves due to delinquent payments. In the event of prepayments, we understand the PID could use its prepayment-delinquency fund to cover interest it otherwise would have received from service area residents had they paid the assessment and accrued interest. The PID can only levy for debt service and collection costs and charge interest on the assessments. We understand the PID cannot issue any additional parity debt. Annual debt service payments on the series 2015 bonds gradually increases to $2.7 million in fiscal 2033, the bonds' final maturity, from $2.17 million in fiscal 2017.

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