Jackson Jambalaya

Standard & Poor downgraded the rating on the 2005 Parkway East bonds from BBB to CCC* last week and stated the outlook was "negative."  The Parkway East Public Improvement District sold $27,770,000 in bonds in 2005 to finance infrastructure improvements. S&P also warned it might downgrade the bonds ever more in the future.  S&P stated in a press release:

Standard & Poor's Ratings Services lowered its underlying rating (SPUR) to 'CCC' from 'BBB' on Madison County, Miss.'s series 2005 special assessment bonds, issued by Parkway East Public Improvement District, and removed the rating from CreditWatch with negative implications. The outlook is negative. The lowered ratings reflect our view that the lack shortfall of pledged revenues, combined with the county's lack of willingness to contribute toward deficiencies in revenues, could lead to a furthering downgrade of the rating, or a potential default, within the next year.

S&P claims Madison County is responsible for any shortfalls in bond payments as it signed a contribution agreement when the bonds were sold and cites no recent payments made by the county as the reason for the downgrade:

On Nov. 1, 2013, a notice to bondholders was filed stating that the trustee notified the Board of Supervisors of Madison County of a shortfall in pledged revenues to pay interest on the series 2005 bonds on the Nov. 1 payment date and requested payment under the contribution agreement, which provides for the county's contribution to fulfill any underfunded debt service payment due on the series 2005 bonds. As of March 6, 2014, the county has not provided funds to cover the shortfall on the series 2005 bonds

However, the contribution agreement states the county only has an obligation to make payments for two years:

"The contribution agreement provides that in the event the District fails, for any reason, to levy and/or collect (or have collected) a sufficient amount of Special Assessments from the owners of land within the district in order to satisfy any debt service payment, the county shall advance to the trustee the outstanding amount required to satisfy the deficient debt service payment." (P.21 of the Issuing statement.)


The county takes the position that the it was required to make payments for only two years under the contribution agreement.  S&P predicted a default since the county chose not to make any more payments:

While the default on the series 2005 bonds has not yet occurred, we feel that the ability and willingness of the county to not reimburse the revenue or debt service reserve funds, or to cover the current and future shortfalls, based on the contribution agreement, could cause a default on the bonds within the next nine months.

Madison County Attorney Mike Espy disputed the downgrade by S&P in an email to several media outlets:

In the notice, S&P says that MC is an "obligor" of the PID bonds.

We dispute this characterization.

MC had/has a Contribution Agreement, as you know, but this does not rise to the level of making MC an "obligor" on the PID bonds.

Neither does this report mention that we are currently litigating the matter in federal district court (the Radian case).

As you know, Madison County's GO bond rating is maintained by Moody's and not Standard & Poor's. However, I wanted to inform you of this distinction in case this downgrade notice came across your desk, and caused some confusion.

Before MC ever gave notice to the PID bond Trustee that we were no longer contributing towards the bond shortfall, we were in communication with Moody's regarding whether the pending PID bond default would impact MC's otherwise excellent bond rating.

We were informed that it would not- as the PID bond is not a MC bond, and as MC did not offer any "guarantees" or FFC beyond the Contribution Agreement, with its 2 year reimbursement requirement.

MC is defending the Radian case and we will not be making any further contributions towards payment of the Parkway E PID bonds.

The Parkway E PID bond downgrade is not surprising, under the circumstances. However, MC will dispute any implication that this bond is an "obligation of MC"- beyond what was required under the 2 year reimbursement clause.

This is why we are in court.

Radian insured the bonds and sued Madison County in court seeking restitution on the bond payments.  However, Madison County takes the firm position the contribution agreement was good for only two years. The county has no obligation to make payments after two years.  The contribution agreement states in Section 3:

Notwithstanding the above, Parkway East hereby convenants and agrees to provide full reimbursement ot the County, no later than two years from the date thee deficient debt sservice payment is made, for the amounts the county provides to the paying agent and/or the bond trustee, pursuant to this Section 3...

Stay tuned.

*S&P defines CCC as "An obligation rated 'CCC' is currently vulnerable to nonpayment, and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic
conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation."

Kingfish note: Nothing like a Bob Montgomery special.