Fitch Downgrades Las Vegas Monorail Revs to 'D'

NEW YORK--(BUSINESS WIRE)--Fitch Ratings has downgraded to 'D' from 'C' the underlying rating on the $451.4 million in outstanding Director of the State of Nevada Department of Business and Industry Las Vegas Monorail project revenue bonds, 1st tier, series 2000. The Las Vegas Monorail Co. (LVMC) is the nonprofit public-benefit corporation responsible for the project. A 'D' rating on Fitch's scale reflects a bankruptcy filing, payment default, or coercive debt exchange. Fitch downgraded the bonds to 'C' in June 2009.

The 'D' rating primarily reflects the LVMC's Chapter 11 bankruptcy filing on Jan. 13, 2010; the related disputes over control of the revenues from ticket sales and advertising between the monorail and Wells Fargo, the trustee, to pay for operating expenses; and the financial metrics of the enterprise which suggest that a payment default is virtually certain on the scheduled July 2010 payment. The bonds are insured by Ambac, and LVMC was able to make its January debt service payment in full by drawing on nearly all of the remaining Ambac surety, originally funded at $20.5 million. The monorail continues to earn enough revenue to cover its operating costs; thus monorail operations are currently expected to continue. However, recent disputes over the allocation of revenues between the monorail and the trustee, in addition to disputes with Ambac over whether the enterprise is eligible for Chapter 11 bankruptcy further complicate matters.

Fitch does not rate the $149.2 million in outstanding Las Vegas Monorail project revenue bonds, 2nd tier, series 2000, and the $48.5 million in outstanding Las Vegas Monorail project revenue bonds, 3rd tier, series 2000.

The first-tier bonds are limited obligations payable from monorail fare and other operating revenues after operations and maintenance expenses and prior to the payment of second- and third-tier bonds. The monorail project consists of an extension and upgrade of an existing 0.8-mile monorail between the MGM Grand Hotel and Casino to Bally's Hotel and Casino and construction of three miles of new guideway from Bally's north to the Sahara Hotel and Casino. Seven stations are located along the alignment serving major hotels, attractions, and the Las Vegas Convention Center along the Las Vegas Strip. Monorail management continues to analyze plans to extend the monorail to Las Vegas McCarran International Airport in order to enhance ridership.

The application of the following criteria was used to derive the rating of the above referenced bonds:

--'Rating Criteria for Infrastructure and Project Finance', (Sept. 29, 2009).

Additional information is available at 'www.fitchratings.com'.

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