For just a weekend at the height of the Great Recession, the Development Finance Authority of Summit County lost its bond rating.
The agency was caught up in the tumult of the period, and its BBB- rating from Fitch was a victim of the ratings agency’s concern that investments it had assessed were not what they appeared, DFA President Chris Burnham said Monday.
By the end of that weekend, he said, the BBB- rating was back, with a new agency.
The loss of any rating more than a decade ago made last week’s announcement by the ratings agency S&P even more sweet — the DFA, which had slowly gotten its rating up to an A-, was now rated A.
That A rating will lower the cost for borrowers who use the DFA to access bond financing. It also opens up the door for the DFA to sell its bonds to a broader swath of buyers.
“This is an amazing accomplishment,” said Mark Lerner, the chair of the DFA’s board of directors and president of GOJO Industries. “I think this just leads to bigger and better things.”
Only one other bond fund in the state, Toledo-Lucas, has the same rating, Burnham said. He called the achievement a “significant accomplishment.”
“I really wanted to have this happen,” said Burnham, who will retire at the end of the year. “It’s another indication of the strength of the organization.”
Higher rating will lower borrower rates
Some insurance companies will only buy debt rated A or higher, Burnham said — and now the DFA’s bonds will be an option for them. He also said the rating change will lower borrower rates — a 30-year bond for a public entity that would have had an interest rate of between 4.7% and 4.9% under the A- rating will now have an interest rate of 4.55% to 4.75% with an A rating, he said.
No DFA bond holder has ever missed a bond payment, Burnham said — when the possibility existed, the DFA took possession of the building and sold it to pay off the bond. What started as a $5 million fund now has outstanding bonds worth upwards of $98 million. The total bond financing for 49 projects has been $179 million.
The DFA’s high level of reserves — $41.9 million at the end of 2023 — along with a $7.5 million line of credit and a diversified portfolio of loans, were the basis of the upgrade, Burnham said.
The S&P announcement of the upgrade on Wednesday credited the DFA’s diversification and its cash reserves.
The new rating is a “huge recognition,” said Dan Rice, the board’s vice chair and the president and CEO of the Ohio & Erie Canalway Coalition.
“This is a result of literally years and years of work,” he said. “It’s really exciting to see it happening.”
