KBRA Upgrades Imperial Regional Detention Facility Project Senior Lien Refunding Revenue Bonds (Federally Taxable) Series 2014 to BB, from B-; Outlook is Stable
7 Sep 2023 | New York
KBRA upgrades the long-term rating to BB, from B-, for the Industrial Development Authority of the County of La Paz, Arizona (Imperial Regional Detention Facility Project) Senior Lien Refunding Revenue Bonds (Federally Taxable) Series 2014. The outlook is Stable.
The upgrade reflects reduced legal risk affecting the credit following the May 23, 2023 filing of a final judgement and permanent injunction barring enforcement of certain provisions of California’s Assembly Bill 32 (AB 32), a 2019 law that would have prevented renewal of the contract that is the primary source of repayment for the bonds.
Key Credit Considerations
The rating was upgraded because of the following key credit considerations:
Credit Positives
- Favorable and final decision in AB 32 litigation eliminates significant obstacle to successful operation of facility through final repayment of bonds in 2040.
- ICE reduced occupancy at Imperial and other immigration detention facilities in response to the pandemic, but utilization has recovered, and the Project performed soundly even through the period of reduced capacity due to ICE’s minimum bed payment guarantee.
- The modern, secure facility is well suited to ICE detainment requirements and is located in an area of significant border activity.
- ICE-owned facilities are sufficient to meet only a small portion of the agency’s detainment needs, creating a structural need for private detention services.
Credit Challenges
- Increased political opposition to private prison and immigrant detention present risks to successful operation of facility through maturity of bonds.
- ICE has wide discretion to terminate the detainee housing agreement and deficiencies in performance by MTC specifically may result in immediate termination.
Rating Sensitivities
For Upgrade
- Implementation of an ICE contract extending through 2040 final maturity of the bonds.
For Downgrade
- Change in federal policy ending the use of private immigration detention facilities.
- Termination of the ICE detainee housing agreement or reduction in the minimum bed day guarantee.
To access rating and relevant documents, click here.
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