January 19, 2012 12:43 PM
Brooke Edwards Staggs, City Editor

VICTORVILLE • A recent default on debt payments triggered one of the top credit rating agencies to downgrade $51 million in Southern California Logistics Airport Authority bonds another two notches, with Moody’s Investor Services predicting the airport won’t catch up on debt payments until 2029.

Moody’s now rates the SCLAA bonds at a B3 on the agency’s scale of Aaa1 to C, with the junk bonds considered “speculative” and a “high credit risk” for investors (click here to read more about the SCLAA rating). That low rating can interfere with the city’s ability to seek new bonds or refinance its existing troubled debt.

“The B3 rating reflects the current defaulted status of the bonds, the likelihood of continuing future defaults and ultimate bondholders recovery estimated at 95 percent,” the New York-based rating agency said in a statement released Tuesday.

Victorville’s airport authority in December defaulted on a series of bonds taken out in 2007 and 2008. SCLAA missed a $535,000 payment after what Moody’s called a “defect” and “an apparent editing error” in the bond indenture prevented reserve funds from being used to cover principal.

Moody’s last dropped its SCLAA bond rating to a B1 in April, citing the fact that property tax values securing the debt had continued to plummet.

Assuming a 1 percent annual growth in property tax values if the economy improves, Moody’s estimates SCLAA revenues won’t cover debt payments again until 2022 and that it’ll be another seven years after that before the authority is current on payments.

Victorville officials said they could have made the payment due Dec. 1 by borrowing funds if the state hadn’t axed all redevelopment agencies. That legislation also contributed to downgrading the airport authority bonds, Moody’s stated, since it isn’t clear as to whether Victorville will be able to use future tax revenues to help right the defaulted debt.

With the uncertainty stemming from the RDA legislation, Moody’s on Tuesday also downgraded by one notch some $11.6 billion in debt owed on all California tax allocation bonds rated below Baa2 (click here to read more about the state downgrade here). However, that move didn’t affect the SCLAA bonds, since they were already rated below that level.

The airport bonds remain on review for possible further downgrade

Brooke Edwards Staggs may be reached at (760) 955-5358 or at bedwards@VVDailyPress.com.

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