Paradise Redevelopment Agency, CA Tax Allocation Bond Rating Lowered To 'BB+' On Declining Revenue, Outlook Is Negative

SAN FRANCISCO (S&P Global Ratings) Feb. 4, 2019--S&P Global Ratings lowered 
its long-term rating to 'BB+' from 'BBB-' on Paradise Redevelopment Agency, 
Calif.'s series 2009 refunding tax allocation bonds and removed it from 
CreditWatch with negative implications, where it was placed on Nov. 9, 2018. 
The outlook is negative.

"The downgrade reflects our view of the likelihood that the project area's 
assessed value will decline to the point where pledged revenue will no longer 
provide sufficient coverage on the series 2009 bonds. The negative outlook 
reflects that there is at least a one-in-three chance that we will lower the 
rating again, potentially by multiple notches, within the next two years," 
said S&P Global Ratings credit analyst Li Yang. "The negative outlook further 
reflects the likelihood that agency may that draw on the bond's debt service 
reserve fund during the next two years," Mr. Yang added.

The project area is located within the town of Paradise, which was largely 
destroyed by the Camp Fire. While the full extent of the damage is currently 
unknown, we believe the agency's ability to generate tax increment revenue 
from the project area in the future and its ability to repay the 2009 bonds is 
likely to be substantially affected. 

We anticipate that the effects of the destruction from the Camp Fire will 
likely be reflected in the fiscal 2020 assessed value (AV) figures for the 
redevelopment project area. We expect these figures will be available in the 
latter half of calendar year 2019.