Fitch Upgrades $11.7MM Howard County, Maryland Series 1993 A&B.Business Editors CHICAGO--(BUSINESS WIRE)--Sept. 24, 2002 Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. upgrades the rating of the $11.7 million Howard County, MD multifamily revenue refunding bonds, series 1993A and 193B to 'AA' from 'A+'. The 1993A bonds have amortized to $7.4 million from $8.7 million at issuance and the 1993B bonds have amortized to $4.3 million from $5.1 million at issuance. The revenue bonds, issued by Howard County, MD, are fully amortizing on a 'sinking fund' method based on a fixed schedule of annual payments of stepping principal and simple interest. The ratings upgrade follows Fitch's annual review of the transaction, which closed on July 8, 1993. Fitch's debt service coverage ratio The debt service coverage ratio (DSCR), or debt service ratio, is the ratio of net operating income to debt payments on a piece of investment real estate. It is a popular benchmark used in the measurement of an income-producing property’s ability to produce (DSCR DSCR See: Debt-service coverage ratio ) increased from 1.40 times (x) at issuance to 2.24x as of year-end 2001. The Fitch DSCR is derived by adjusting the borrower's net operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. to reflect a 5% management fee and the greater of $225 per unit or actual capital expenditures, then applying the resulting Fitch cash flow to a maximum annual sinking fund sinking fund, sum set apart periodically from the income of a government or a business and allowed to accumulate in order ultimately to pay off a debt. A preferred investment for a sinking fund is the purchase of the government's or firm's bonds that are to be paid debt service of $1,270,510. The DSCR increase is primarily attributable to steady rental increases and stable occupancy levels in the upper 90% range that have been achieved at the properties since issuance. The revenue bonds are secured by two cross-collateralized and cross-defaulted apartment projects known as Dominion at Eden Brook (formerly known as Eden Commons) and Dominion King's Place (formerly known as Braeland Commons). Together, they constitute 404 rental units in Columbia, MD. The bonds were issued to finance affordable housing projects in the local community. Consequently, pursuant to the Amendment to the Declaration and Agreement of Restrictive Covenants, dated July 8, 1993, 20% of the units at each property must be set aside for tenants whose combined family gross income does not exceed 80% of the county's median income. As further support for the transaction, a $1.2 million debt service reserve fund in the form of a one year renewable irrevocable letter of credit Irrevocable letter of credit Assurance of funds issued by a bank that cannot be canceled or amended without the beneficiary's approval. (LOC LOC - lines of code ) has been issued by NationsBank in favor of Crestar Bank Virginia, the Trustee. The LOC is sufficient to service approximately one year of maximum annual sinking fund debt service. Fitch will continue to closely monitor the transaction as part of its ongoing surveillance. |
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