Fitch Downgrades Archdiocese of NOLA Revs to 'D'; IDR Affirmed at 'D' in Bankruptcy

Fitch Ratings
June 26, 2020

https://www.fitchratings.com/research/us-public-finance/fitch-downgrades-archdiocese-of-nola-revs-to-d-idr-affirmed-at-d-in-bankruptcy-26-06-2020

Fitch Ratings - Chicago - 26 Jun 2020: Fitch Ratings has downgraded approximately $40.1 million in outstanding series 2017 fixed-rate revenue bonds issued by the Louisiana Public Facilities Authority on behalf of the Archdiocese of New Orleans (LA) to 'D' from 'CC'. The Long-Term Issuer Default Rating (IDR) of the Archdiocese has been affirmed at 'D'.

The 2017 bonds are secured by payments made by the Authority, and the source of these payments is solely a general unsecured obligation of the Archdiocese.

TRUSTEE NOTICE OF NON-PAYMENT: The downgrade of the bond ratings to 'D' reflects the virtual certainty of a payment default on July 1, 2020 while in bankruptcy. The Archdiocese filed for Chapter 11 bankruptcy on May 1, 2020. The trustee gave notice on June 26, 2020 that the July 1 debt service payments will not be made, as the Archdiocese has not paid the trustee for debt service payments due on July 1, and the trustee does not have funds on deposit to make debt service payments. The IDR of 'D' reflects the Archdiocese's Chapter 11 bankruptcy filing.

ESG - SOCIAL IMPACTS: The Archdiocese has an Environmental, Social and Governance (ESG) relevance score of '5' for Social Impacts due to potentially significant liability from abuse claims, which appear to be a key driver of the Archdiocese's bankruptcy filing.

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade:

--Not applicable in default.

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade:

--Not applicable in default.

International scale credit ratings of Public Finance issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of three notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579.

The Roman Catholic Church of the Archdiocese of New Orleans operates in eight civil parishes in metropolitan New Orleans and encompasses 4,208 square miles and 112 church parishes. In addition to the parishes, it also supports and administers 79 schools, with an estimated enrollment of 34,182 for the 2019-2020 school year. Nursing homes and other community service facilities are also sponsored by the Archdiocese.

The 2017 bonds are the sole obligation of the Archdiocese corporate entity. Individual parishes, elementary and high schools, nursing homes, affordable senior living facilities, and other church-related agencies and institutions within the corporation's geographical boundaries are not consolidated within the reported Archdiocese corporate entity.

The principal sources of information used in the analysis are described in the Applicable Criteria.

Archdiocese of New Orleans (LA): Exposure to Social Impacts: '5'

The Archdiocese of New Orleans has an Exposure to Social Impacts ESG score of '5' due to the rating impact from multiple public legal abuse claims underway, which appear to be a key driver of its bankruptcy filing.

Except for the matters discussed above, the highest level of ESG credit relevance, if present, is a score of '3' - ESG issues are credit neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg.