Fitch Rts Toledo-Lucas Cnty Port Auth, Ohio Bd Fund Revs `BBB+'

    NEW YORK--Aug. 13, 2001--Fitch assigns a `BBB+' rating to the Toledo-Lucas County Port Authority, OH's (the authority) $6,235,000 development revenue bonds (Northwest Ohio Bond Fund), series 2001G, (Rassini Chassis Systems, LLC Project). The series G bonds will be sold via negotiation through McDonald Investments Inc. in late August.
    The `BBB+' rating reflects Northwest Ohio Bond Fund's (the bond fund) substantial reserves and other forms of security, which supplement a pool of loan repayments primarily from small and medium-sized industrial and commercial enterprises in the Toledo area. The rating recognizes the bond fund's strong borrower repayment record during its 13-year history, as well as the fiscal and economic health of both the authority and the Toledo area. Management monitors its borrowers and maintains financial flexibility through the program's reserves to cope with potential loan repayment delinquencies if collateral assets must be liquidated or loans restructured. The program's management practices, underwriting standards, and credit prospects should remain stable. With approximately 48% of repayments derived from the historically cyclical auto industry, correlation risk remains a concern.
    The bond fund's reserves are comprised of: primary reserves, funded by each borrower equal to approximately 10% of bond principal; program reserves, which include a $6.5 million cash contribution from the authority and a $6.5 million irrevocable letter of credit from Fifth Third Bank that expires Aug. 1, 2010, subject to extension; and additional reserves specific to certain series of bonds. Following this transaction, primary and program reserves will total 27.6% of outstanding loans. The authority's total reserves, including reserves specific to individual bond series, could withstand defaults by more than 40% of loans, excluding liquidation proceeds from defaulting loans that would likely offset total losses.
    The authority established the bond fund in 1988 to advance economic development efforts in the region. After these issues, the bond fund loan pool totals 24 borrowers, with about 77% of loans to companies exhibiting speculative-grade credit characteristics. All loans are current, including that of Owens-Corning Fiberglas Corp., which filed Chapter 11 bankruptcy on Oct. 5, 2000. While Owens-Corning's reorganization under the bankruptcy code could affect its future lease payments to the authority, Fitch believes that the company will likely maintain its obligation as the building financed by the loan serves as the company's world headquarters. Owens-Corning's loan currently represents 5.7% of the program's portfolio.
    The 2001G bonds will finance the purchase and refurbishment of equipment for Rassini Chassis Systems, LLC, a maker of coil springs for automobile suspensions. As part of this project Rassini will open its first US manufacturing facility in Williams County, OH. Rassini is a subsidiary of SANLUIS Corporacion, S.A. de C.V., a major Mexican supplier of suspension and brake systems components to automotive manufacturers, which will guarantee Rossini's obligations under the loan agreement. SANLUIS supplies automotive parts to original equipment manufacturers and maintains long term contracts with most of the industry leaders, including General Motors Corp., Ford Motor Co., and DaimlerChrysler AG. Fitch rates SANLUIS `BB' with a Stable Rating Outlook. Rassini will meet the loan fund's security deposit requirement through a letter of credit from an approved financial institution.