Brinton Apartments Penn LLC, PA Rating Lowered Two Notches To 'BB-' On Financial Deterioration; Outlook Negative

CENTENNIAL (S&P Global Ratings) Aug. 26, 2019--S&P Global Ratings lowered its long-term rating two notches to 'BB-' from 'BB+' on Pennsylvania Housing Finance Agency's series 2015A multifamily housing revenue bonds (Brinton Manor and Brinton Towers Apartment project), issued for Brinton Apartments Penn LLC. At the same time, S&P Global Ratings removed the rating from CreditWatch, where it had been placed with negative implications on July 25, 2019. The outlook is negative.
"The downgrade follows material deterioration in the project's financial performance in fiscal 2018, as reported in audited financials released in August 2019, owing to increased expenses and declining revenue, culminating in a decrease in net cash flow," said S&P Global Ratings credit analyst Daniel Pulter. This translated to a decline in single-year maximum annual debt service (MADS) coverage below 1x, and a three-year average MADS coverage of 1.06x. "The downgrade also follows our revised view of the project's strategy and management to highly vulnerable from vulnerable, owing to a deterioration in track record and operational effectiveness, as demonstrated by recent cash flow volatility and technical defaults at other projects under the same parent-ownership and management structure," Mr. Pulter added. Under our criteria, the rating is capped at 'BB+' in accordance with the highly vulnerable strategy and management assessment, because of the project's vulnerable financial position and highly vulnerable loss coverage.
Our view of owner JPC Charities, and PF Holdings LLC as manager, is also informed by repeated difficulty in obtaining critical fiscal 2018 financial information for several other projects under the same parent-ownership and management structure. We have found that this difficulty in gathering critical and required information related to a project typically proceeds financial and operational performance declines.
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