DBRS Morningstar Finalizes Provisional Rating on Hamilton Community Authority (Ohio) Property Assessed Clean Energy Taxable Revenue Bonds (Champion Mill Project)

DBRS, Inc. (DBRS Morningstar) finalized its provisional rating of A (sf) on the $32,020,000 Series 2020 (formerly Series 2019) bonds (the C-PACE Bonds) issued by Hamilton Community Authority (Ohio) Property Assessed Clean Energy Taxable Revenue Bonds (Champion Mill Project) (formerly Champion Mill Project PACE Bonds - SASB CPACE). As of today, DBRS Morningstar upgraded the rating to A (sf) from BB (sf) after placing it Under Review with Developing Implications on November 15, 2019.

The C-PACE Bonds are being issued to provide financing for certain qualifying expenditures in connection with the Champion Mill Project, which will include a newly developed 650,000-square-foot sports complex and a 235-key full-service hotel and convention center in Hamilton, Ohio.

The DBRS Morningstar rating of A (sf) contemplates the ultimate payment of interest and principal after consideration of recoveries should the Special Assessments become delinquent. The transaction also provides for a debt service reserve fund of approximately $1.2 million, which is sufficient for one semiannual payment that includes both interest and scheduled principal amortization.

When DBRS Morningstar assigned the provisional rating of BB (sf) on November 15, 2019, the notional amount of the C-PACE Bonds was approximately $49 million. The significant reduction of the C-PACE Bond issuance to $32,020,000 lowered the loan-to-value (LTV) ratio, resulting in greater credit enhancement for the C-PACE Bonds.

RATING RATIONALE
The DBRS Morningstar rating is based on its review of the following analytical considerations:

-- Security for the C-PACE Bonds. The C-PACE Bonds are secured by Pledged Revenues that primarily consist of Special Assessments levied by the City of Hamilton against the real property underlying the development (the Assessed Property).

-- In the event of delinquent assessment payments, the C-PACE claim is pari passu with the Taxing Authority but senior to the claims of the other Champion Mill Project lenders. The real estate is located in Hamilton, and the Assessed Property will include a to-be-developed 650,000-square-foot sports complex and a 235-key full-service hotel and convention center.

-- The relatively low LTV of the C-PACE Bonds. The LTV was determined by a review of the appraisal value, Development Budget (e.g., construction costs), and DBRS Morningstar value for the completed project when assuming stressed property cash flows and stressed cap rates.

-- The Project Sponsor’s capabilities with regard to the development and operation of the project. The Project Sponsor, Samuel R. Beiler, developed and continues to operate a similar facility—Spooky Nook in Lancaster, Pennsylvania. While not a factor in DBRS Morningstar’s rating, the Project Sponsor is providing a Completion Guarantee.

-- Although not considered in its rating process, DBRS Morningstar notes the Champion Mill Project may benefit from several public subsidies and economic development incentives provided by a number of government, quasigovernment, and affiliated agencies. These include Tax Increment Financing Bonds, Historic Tax Credits, grants for infrastructure, forgivable loans, and other subsidies from the Butler Country Visitors Bureau.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodologies are the North American Single-Asset/Single-Borrower Ratings Methodology and Rating U.S. Property Assessed Clean Energy (PACE) Securitizations, which can be found on dbrs.com under Methodologies & Criteria.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

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