Fitch Ratings assigns a 'BBB+' rating to the Summit
County Port Authority, OH's (bond fund program) $3,000,000 taxable
development revenue bonds, series 2006C (EXAL Corporation Project).
The series 2006C bonds will be offered by Robert W. Baird & Co. Inc.
during the week of Feb. 6. Fitch also affirms the 'BBB+' rating on the
authority's $26.9 million outstanding bond fund development revenue
bonds. The Rating Outlook is Stable.
The 'BBB+' rating reflects the sound structure of the bond fund, program reserve requirements that provide liquidity and first-loss protection to meet bond payments in the event of a default by the authority or future program participants, and formal loan underwriting criteria, which are expected to allow the bond fund to maintain a loan portfolio whose credit profile meets the requirements of the fund rating. The bond fund, which was established under a basic trust indenture dated July 1, 2004 between Summit County Port Authority (the authority) and U.S. Bank National Association (the trustee), exists to promote economic development primarily in Summit County by loaning revenue bond proceeds to small- and medium-sized commercial and industrial enterprises. By entering into cooperative agreements with governmental entities, the authority can also make loans for the bond fund in various counties throughout the state.
Bondholders of the current series and future bond series issued under the basic trust indenture will have a pro rata claim against all funds created under the indenture, including, among other funds, the revenue fund, into which borrowers will make monthly loan repayments, the primary and program reserve funds, and the collateral fund. The bond documents require the establishment of a primary reserve fund for each series of bonds equal to 10% of the original par amount of the bonds. EXAL Corporation (EXAL), which is the contracting party, will meet this requirement with a qualified letter of credit.
In addition to the primary reserves provided by the borrowers, totaling approximately $2.9 million with this issue, the bond fund maintains program reserves totaling $10 million: a $3 million county grant received in February 2001; a $2 million state grant received in April 2001; and a $5 million irrevocable letter of credit (LOC). The LOC will expire on Sept. 15, 2009 and is subject to one-year extensions. The LOC provides the bond fund with a revolving line of credit that supplements the primary and other program reserves. The bank's lien on bond fund collateral is subordinate to bondholders.
After this issue, the primary and program reserves will equal 44% of the total outstanding bonds, which provide sufficient cushion to offset potential loan repayment delinquencies or default by the authority. Including the 2006C issue, the program will have 10 loans outstanding totaling $29.9 million. The Township of Twinsburg, OH, represents the program's largest borrower at $5.6 million (or 18.7% of total outstanding loans). As the authority issues additional bonds, it is anticipated that the reserves will be further leveraged, but with the objective of maintaining the 'BBB+' rating on the bond fund.
The authority has adopted formal underwriting criteria for bond fund borrowers, which consider purpose for the project, current and historical financial strength of the borrower, knowledge and experience of management, and the source and plan of loan repayment. The underwriting criteria also include debt service coverage, leverage, and liquidity and collateral requirements.
Located in northeastern Ohio, Summit County's (general obligation bonds rated 'AA' by Fitch) growing service sector and reputation as a leading research and development center for the polymer industry continues to generate residential investment and high per capita income levels. The increasing diversification of the county's economy provides more employment opportunities and improves the overall attractiveness of the area.
Bond proceeds will be used to pay a portion of the costs for the construction, equipping and improvements of a 165,000 square foot manufacturing plant for EXAL. Located in Youngstown, OH, EXAL manufactures and labels aluminum containers and bottles. The company's major customers include Unilever, Aerosol Services, L'Oreal USA, Coca-Cola, Anheuser-Busch, Gram Webb, and Procter & Gamble.
The 2006C bonds are secured by a parity first-mortgage lien on the land and facility to be financed with other project debt totaling $7 million. Bondholders also have a parity second security interest in certain equipment of EXAL. Furthermore, the primary and program reserves secure the bonds.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 'www.fitchratings.com'. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
The 'BBB+' rating reflects the sound structure of the bond fund, program reserve requirements that provide liquidity and first-loss protection to meet bond payments in the event of a default by the authority or future program participants, and formal loan underwriting criteria, which are expected to allow the bond fund to maintain a loan portfolio whose credit profile meets the requirements of the fund rating. The bond fund, which was established under a basic trust indenture dated July 1, 2004 between Summit County Port Authority (the authority) and U.S. Bank National Association (the trustee), exists to promote economic development primarily in Summit County by loaning revenue bond proceeds to small- and medium-sized commercial and industrial enterprises. By entering into cooperative agreements with governmental entities, the authority can also make loans for the bond fund in various counties throughout the state.
Bondholders of the current series and future bond series issued under the basic trust indenture will have a pro rata claim against all funds created under the indenture, including, among other funds, the revenue fund, into which borrowers will make monthly loan repayments, the primary and program reserve funds, and the collateral fund. The bond documents require the establishment of a primary reserve fund for each series of bonds equal to 10% of the original par amount of the bonds. EXAL Corporation (EXAL), which is the contracting party, will meet this requirement with a qualified letter of credit.
In addition to the primary reserves provided by the borrowers, totaling approximately $2.9 million with this issue, the bond fund maintains program reserves totaling $10 million: a $3 million county grant received in February 2001; a $2 million state grant received in April 2001; and a $5 million irrevocable letter of credit (LOC). The LOC will expire on Sept. 15, 2009 and is subject to one-year extensions. The LOC provides the bond fund with a revolving line of credit that supplements the primary and other program reserves. The bank's lien on bond fund collateral is subordinate to bondholders.
After this issue, the primary and program reserves will equal 44% of the total outstanding bonds, which provide sufficient cushion to offset potential loan repayment delinquencies or default by the authority. Including the 2006C issue, the program will have 10 loans outstanding totaling $29.9 million. The Township of Twinsburg, OH, represents the program's largest borrower at $5.6 million (or 18.7% of total outstanding loans). As the authority issues additional bonds, it is anticipated that the reserves will be further leveraged, but with the objective of maintaining the 'BBB+' rating on the bond fund.
The authority has adopted formal underwriting criteria for bond fund borrowers, which consider purpose for the project, current and historical financial strength of the borrower, knowledge and experience of management, and the source and plan of loan repayment. The underwriting criteria also include debt service coverage, leverage, and liquidity and collateral requirements.
Located in northeastern Ohio, Summit County's (general obligation bonds rated 'AA' by Fitch) growing service sector and reputation as a leading research and development center for the polymer industry continues to generate residential investment and high per capita income levels. The increasing diversification of the county's economy provides more employment opportunities and improves the overall attractiveness of the area.
Bond proceeds will be used to pay a portion of the costs for the construction, equipping and improvements of a 165,000 square foot manufacturing plant for EXAL. Located in Youngstown, OH, EXAL manufactures and labels aluminum containers and bottles. The company's major customers include Unilever, Aerosol Services, L'Oreal USA, Coca-Cola, Anheuser-Busch, Gram Webb, and Procter & Gamble.
The 2006C bonds are secured by a parity first-mortgage lien on the land and facility to be financed with other project debt totaling $7 million. Bondholders also have a parity second security interest in certain equipment of EXAL. Furthermore, the primary and program reserves secure the bonds.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 'www.fitchratings.com'. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.