Fitch assigns an 'A-' rating to up to $30 million of
bonds and notes consisting of the following issues:
-- Up to $17.5 million Louisville/Jefferson County Metro Government Industrial Building Revenue Bonds, series 2006;
-- Up to $6 million Port of Greater Cincinnati Development Authority Economic Development Revenue Bonds, series 2006;
-- Up to $6.5 million Sisters of Mercy of the Americas, Regional Community of Cincinnati Variable-Rate Taxable notes, series 2006.
The Rating Outlook is Stable.
The parity tax exempt fixed-rate bonds and taxable variable-rate notes are to be sold on behalf of the Sisters of Mercy of the Americas, Regional Community of Cincinnati Obligated Group, Ohio, on or about March 5, through negotiation by Bear, Stearns & Co. Inc. The taxable notes will initially be issued in the auction-rate certificate mode. The broker-dealer is Bear, Stearns & Co. Inc. The Bank of New York Trust Company, N.A., is the bond, note and master trustee for the issues, and the auction agent for the notes. Proceeds from the bonds and notes will be used to finance various capital projects including a high school relocation project in Louisville, and the termination of a defined pension benefit plan.
The new obligated group includes the Sisters of Mercy of the Americas, Regional Community of Cincinnati (RSM, or the Corporation), a non-profit corporation and Roman Catholic congregation of religious women, headquartered in Cincinnati, and four Catholic secondary schools for women owned and controlled by RSM.
The 'A-' rating is primarily supported by the substantial financial resources of the Corporation's general operating fund: over $70 million of cash and investments as of Oct. 31, 2005, that secures the bonds and notes. The Corporation also has over $95 million of additional cash and investments. The majority of such funds are held in a legally separate retirement trust established in 1980 to cover the retirement benefits and maintenance needs of the sisters. While these assets are shielded from bondholders, distributions from the trust to the operating fund provide an important source of revenues and cash flow for debt service. Based on an actuarial study prepared in 2000, the retirement trust is not expected to be depleted by the sisters' maintenance and retirement expenses. Moreover, the recent higher distributions of about $10 million per year from the trust into the pledged operating fund are expected to continue for the near- to mid-term.
The Corporation has preserved its wealth with a prudent and effective investment management program, and limited transfers to affiliates. RSM has ownership and complete control over the use of their assets, and Vatican approval is not required for the disposition of assets and bankruptcy. The Corporation is presently evaluating the feasibility of merging with other established Sisters of Mercy congregations to achieve administrative and mission-related efficiencies. These discussions are at a preliminary stage; however, any transaction would be subject to the terms and provisions of the master trust indenture and its respective protective covenants.
The new obligated group's commitment to support the debt and preserve pledged assets is evidenced by above-average security and covenant protections included in the master trust indenture. The bonds and notes are a joint and several obligation of each member of the obligated group. The pledge to fully and timely repay principal and interest is secured by a gross receipts pledge and a negative lien pledge subject to permitted encumbrances (only minimal amount of mortgage-backed debt is permitted).
The obligated group has covenanted to maintain a ratio of unrestricted resources to total outstanding debt of 1.5 to 1.0 at all times and for transactions which could potentially dilute assets and operations. This ratio has exceeded 2.0 times(x) since fiscal 2003 with the obligated group's combined financial resources. The obligated group has also covenanted to maintain a minimum 1.10x debt service coverage ratio of maximum annual debt service (MADS). Following a change in the distribution methodology from the sisters' retirement trust to the operating fund in 2004, historical pro forma coverage increased from about 1x MADS to over 4x. Going forward, Fitch assumes debt service coverage will be in the range of 2x to 3x due to the obligated group's higher ongoing capital costs.
Following the issuance of the series 2006 bonds, debt burden is manageable from both an income statement and balance sheet perspective. MADS consumes approximately 6.0% of the obligated group's unaudited combined annual revenues as of June 30, 2005 The debt burden is expected to remain manageable with limited future capital needs and no immediate debt issuance plans. The obligated group's capital spending has totaled just under $22 million over the last five years.
The primary credit concern for this operationally small and unseasoned obligated group is that the constituent high schools have insufficient revenues, cash flow and liquidity to service debt on their own at this time. A potential reduction in the Corporation's distribution of retirement benefits to the operating fund could limit the obligated group's financial viability. Other risks include general investment volatility, which Fitch believes is mitigated by RSM's prudent investment program, deferred principal amortization in the plan of finance and the absence of an obligated group audit.
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.
-- Up to $17.5 million Louisville/Jefferson County Metro Government Industrial Building Revenue Bonds, series 2006;
-- Up to $6 million Port of Greater Cincinnati Development Authority Economic Development Revenue Bonds, series 2006;
-- Up to $6.5 million Sisters of Mercy of the Americas, Regional Community of Cincinnati Variable-Rate Taxable notes, series 2006.
The Rating Outlook is Stable.
The parity tax exempt fixed-rate bonds and taxable variable-rate notes are to be sold on behalf of the Sisters of Mercy of the Americas, Regional Community of Cincinnati Obligated Group, Ohio, on or about March 5, through negotiation by Bear, Stearns & Co. Inc. The taxable notes will initially be issued in the auction-rate certificate mode. The broker-dealer is Bear, Stearns & Co. Inc. The Bank of New York Trust Company, N.A., is the bond, note and master trustee for the issues, and the auction agent for the notes. Proceeds from the bonds and notes will be used to finance various capital projects including a high school relocation project in Louisville, and the termination of a defined pension benefit plan.
The new obligated group includes the Sisters of Mercy of the Americas, Regional Community of Cincinnati (RSM, or the Corporation), a non-profit corporation and Roman Catholic congregation of religious women, headquartered in Cincinnati, and four Catholic secondary schools for women owned and controlled by RSM.
The 'A-' rating is primarily supported by the substantial financial resources of the Corporation's general operating fund: over $70 million of cash and investments as of Oct. 31, 2005, that secures the bonds and notes. The Corporation also has over $95 million of additional cash and investments. The majority of such funds are held in a legally separate retirement trust established in 1980 to cover the retirement benefits and maintenance needs of the sisters. While these assets are shielded from bondholders, distributions from the trust to the operating fund provide an important source of revenues and cash flow for debt service. Based on an actuarial study prepared in 2000, the retirement trust is not expected to be depleted by the sisters' maintenance and retirement expenses. Moreover, the recent higher distributions of about $10 million per year from the trust into the pledged operating fund are expected to continue for the near- to mid-term.
The Corporation has preserved its wealth with a prudent and effective investment management program, and limited transfers to affiliates. RSM has ownership and complete control over the use of their assets, and Vatican approval is not required for the disposition of assets and bankruptcy. The Corporation is presently evaluating the feasibility of merging with other established Sisters of Mercy congregations to achieve administrative and mission-related efficiencies. These discussions are at a preliminary stage; however, any transaction would be subject to the terms and provisions of the master trust indenture and its respective protective covenants.
The new obligated group's commitment to support the debt and preserve pledged assets is evidenced by above-average security and covenant protections included in the master trust indenture. The bonds and notes are a joint and several obligation of each member of the obligated group. The pledge to fully and timely repay principal and interest is secured by a gross receipts pledge and a negative lien pledge subject to permitted encumbrances (only minimal amount of mortgage-backed debt is permitted).
The obligated group has covenanted to maintain a ratio of unrestricted resources to total outstanding debt of 1.5 to 1.0 at all times and for transactions which could potentially dilute assets and operations. This ratio has exceeded 2.0 times(x) since fiscal 2003 with the obligated group's combined financial resources. The obligated group has also covenanted to maintain a minimum 1.10x debt service coverage ratio of maximum annual debt service (MADS). Following a change in the distribution methodology from the sisters' retirement trust to the operating fund in 2004, historical pro forma coverage increased from about 1x MADS to over 4x. Going forward, Fitch assumes debt service coverage will be in the range of 2x to 3x due to the obligated group's higher ongoing capital costs.
Following the issuance of the series 2006 bonds, debt burden is manageable from both an income statement and balance sheet perspective. MADS consumes approximately 6.0% of the obligated group's unaudited combined annual revenues as of June 30, 2005 The debt burden is expected to remain manageable with limited future capital needs and no immediate debt issuance plans. The obligated group's capital spending has totaled just under $22 million over the last five years.
The primary credit concern for this operationally small and unseasoned obligated group is that the constituent high schools have insufficient revenues, cash flow and liquidity to service debt on their own at this time. A potential reduction in the Corporation's distribution of retirement benefits to the operating fund could limit the obligated group's financial viability. Other risks include general investment volatility, which Fitch believes is mitigated by RSM's prudent investment program, deferred principal amortization in the plan of finance and the absence of an obligated group audit.
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.