About $450 million of municipal bonds that helped finance the Las Vegas Monorail had their credit rating cut to C from CC by Fitch Ratings, implying that “default of some kind appears imminent or inevitable.”
The July 2009 debt service payment will probably be drawn from a surety bond provided by Ambac Assurance Corp. for the reserve fund on the first-tier debt, the rating company said in a news release today from New York.
“In the event that there is a performance issue on the Ambac surety, funds will likely be insufficient to make the next first-tier debt service payment,” Fitch said.
Las Vegas Monorail Co., nonprofit operator of the 3.9-mile (6.3-kilometer) elevated train line, has drawn on cash reserves to make debt payments since January 2008 amid lower-than- expected fare revenue, Fitch said. Daily average ridership on the seven-stop monorail fell almost 24 percent during the first five months of year, as the price of an unlimited day pass was raised by a dollar to $13 and the recession led fewer people to visit Las Vegas.
Nevada Department of Business and Industry 5 3/8 percent bonds due in 2040 and backed by a first-tier lien of monorail revenue traded between dealers last week at 53 cents on the dollar, Municipal Securities Rulemaking Board data show. The securities have traded in the past 12 months as low as 11 cents and as high as 79 cents. They were issued in 2000 at 93.6 cents.
Fitch’s C rating on the debt is 11 levels below investment grade. The company does not rate $149 million of bonds that have a second-tier lien or $49 million of third-tier securities.