Standard & Poor’s, a financial research agency that issues widely recognized ratings of creditworthiness, lowered the bond rating of the Martha’s Vineyard Land Bank on April 12, from ‘A’ to ‘A-.’
“The downgrade reflects the recent declines in pledged revenue,” said credit analyst Henry Henderson in a news release.
From 2002 through 2006, the Land Bank borrowed $77.3 million in bonds. Borrowing money gives the Land Bank more flexibility in purchasing property for conservation, according to executive director James Lengyel. The organization makes payments on the bonds from revenue earned through a two percent surcharge on real estate sales. When real estate sales dip, the Land Bank’s revenues decline.
“It means one thing and one thing only,” Mr. Lengyel said about the lowered bond rating. “When and if the Land Bank ever decides to issue another revenue bond, it will pay higher interest.”
He said the Land Bank is in no danger of failing to make its bond payments because it has reserves of about $10 million in unencumbered funds, in addition to the current revenue stream.
Standard & Poor’s said the outlook is stable for the Land Bank.
“The stable outlook reflects our expectation that pledged revenues will remain adequate for the somewhat narrow revenue base. If revenues were to significantly decrease from the fiscal 2009 levels, Standard & Poor’s could lower the rating again,” the analyst said.