Fitch Rates Cleveland-Cuyahoga County Port Authority, Ohio's 2008A Revs 'BBB+'

CHICAGO--(BUSINESS WIRE)--Fitch Ratings has assigned a 'BBB+' rating to the Cleveland-Cuyahoga County Port Authority, Ohio's (the authority) $5.16 million taxable development revenue bonds, series 2008A (Brush Wellman Project). Fitch has also affirmed the 'BBB+' rating on the authority's $81.6 million in outstanding development revenue program bonds. The Rating Outlook on the bonds remains Negative.

The 'BBB+' rating reflects the bond fund's adequate reserves and satisfactory loan underwriting standards. The Negative Outlook reflects the program's potentially reduced financial flexibility caused by the potential closure of Myers University (the bond fund's fifth largest borrower) and economic pressures throughout the region that could negatively affect other pool borrowers.

Myers currently has an outstanding loan balance of $5.72 million, which represents 6.6% of the bond fund portfolio. The loan is secured by additional and primary reserves from the borrower totaling $300,000 and $572,500, respectively, as well as a first mortgage lien on the university's 40,000 square foot facility located in near downtown Cleveland.

The bond fund's primary reserves total approximately $10 million, and program reserves total $13 million. Program reserves are comprised of $4 million in cash and a $9 million irrevocable LOC from Fifth Third Bank. The LOC, which expires March 1, 2018, is extendable by mutual agreement every two years, and the bank's lien on bond fund collateral is subordinate to bondholders. A temporary auxiliary reserve fund from the authority totaling $1.3 million is also available; however, the auxiliary reserve is not legally pledged under the bond fund program's basic trust indenture. Shortfalls in bond payments due to loan or lease defaults must be made up first from the defaulting borrowers' primary reserves, then from program reserves, and finally from any remaining primary reserves from all other pool borrowers.

The authority established the bond fund in 1997 to promote economic development efforts primarily in Cuyahoga County, as well as various counties throughout the state. Including series 2008A, the loan pool consists of 23 loans totaling $86.8 million, with approximately 81% of loans to entities exhibiting speculative-grade credit characteristics.

Proceeds of the 2008A bond will be used to pay a portion of the costs of constructing a new beryllium manufacturing facility, a storage facility, and rehabilitation of an existing support facility including private and related public improvements, located in the City of Elmore, Ohio. Brush Wellman, a subsidiary of Brush Engineered Materials, Inc., is the contracting party. The 2008A bonds are secured by a parity first mortgage-lien on the project with the Ohio Department of Development, a construction guarantee, a corporate guarantee by Brush Engineered Materials, Inc., and program and dedicated primary reserves mentioned above.

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