Moody's Investor Service has restored Collingswood bond ratings to investment-grade status, the borough reports, a move that will help with the next phase of the LumberYard construction project.
Although an official announcement from Moody's was unavailable at press time, Kyle Fitzpatrick, a client service representative for the agency, confirmed that the ratings upgrade would be published to the company website by the end of the day.
"I’m happy that they did it, but it’s important to note that we haven’t changed one thing from what we announced we were doing last August, when this happened," Collingswood Mayor James Maley told Patch.
"All we did was follow through on our plan, and in that time period, Moody’s changed their conclusion," he said. "None of the facts have changed. Even with their rating hanging over our head, making it harder to do, we did everything we said we would do."
A press release from the borough indicates various errors in Moody's 2011 junk-status downgrade of its credit rating for Collingswood. These included overstating the amount of money borrowed in the LumberYard deal as well as criticizing its four-year surplus payouts of revenues from the Parkview redevelopment project.
In a May 2 press release, the credit ratings agency stated that general obligation bond sales, such as those used to finance the LumberYard project, exposed the borough to additional risk.
“In our view, nonpayment of guaranteed bonds is equivalent to a default on a municipality’s own general obligation bonds,” said Moody’s analyst Josellyn Yousef in that statement.
Despite that hurdle, Collingswood was able to secure a loan only about half a percentage point lower than the market rate in a $5.1 million deal with Susquehanna Bank to finance the remainder of the project.
Maley told Patch that agreement was finalized formally Wednesday.
"We closed on the condo units yesterday," Maley said. "The bank deal has been consummated; it’s done."
In terms of using this new information to secure a lower interest rate for those loans, the mayor said "We’ll take a little time and talk with some banks and assess what we can do.
"It was Herculean that we actually were able to accomplish it," Maley said.
Finalizing a deal with the Ingerman Group, which the borough has brought in to complete the construction project, will top the agenda at the Borough Commissioners meeting Monday, June 4.
As for residents of the LumberYard, "Nothing changes for them right now," Maley said.
"The condo association has to approve [the Ingerman deal, but] it’s the same plan."
UPDATE (May 31, 2012, 4:58 p.m.) - Moody's released an official statement on its rating action, which it says "affects $30.6 million of outstanding long-term debt secured by the borough's general obligation unlimited tax pledge."
The upgrade, Moody's says in its release, was related to the "$5.1 million one-year bond anticipation note" signed with Susquehanna Bank, although Moody's cautions that Collingswood has "very high annual debt service of 16.6 percent of expenditures" and a "reliance on PILOT revenues and lease payments from redevelopment projects to fund operations (12 percent of budget)."
In favor of the borough is its "modestly sized tax base with wealth levels that track slightly above the national median."