Municipal bonds tied to Destiny USA, the biggest shopping mall in New York state, were cut deeper into junk by Moody’s Investors Service on Wednesday because the complex is unlikely to meet a key measure of profitability needed to extend an outstanding loan.
Moody’s lowered the rating on municipal bonds backed by payments in lieu of taxes to Caa2 from Caa1 and revised the outlook to stable, the company said in a release. The downgrade reflects an increase in “default risk” because the net-operating-income target needed to extend an existing subordinate mortgage-backed security loan past June 2024 is “unlikely to be satisfied.”
The mall met the first NOI target of $16 million to extend the CMBS loan to June 6, 2024, but the next target is 18.75% higher, “a high threshold that will be difficult to achieve,” Moody’s said. If the threshold isn’t satisfied and the obligor, Carousel Center Company LP, is unable to refinance the loan, then Carousel would enter receivership and the property may be put up for sale, Moody’s said.
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