Philly Deals: Fitch cuts rating on Montco bonds to AA+
Montgomery County is still rich. Still a corporate center. Still a place with relatively low property taxes, by suburban standards. But it’s a little less perfect than it used to be, according to Wall Street.
Montgomery County is still rich. Still a corporate center. Still a place with relatively low property taxes, by suburban standards.
But it's a little less perfect than it used to be, according to Wall Street.
On Tuesday, Fitch Ratings cut the credit rating on bonds Montco wants to refinance to AA+, down a notch from its former top-level AAA. In a report by analyst Eric Friedman, Fitch blamed it on the "sizable decline in the county's general-fund balance following several years of large operating deficits," to less than 7 percent of its $400 million-plus budget — less than a AAA community should have on hand to cover emergencies, unless it cuts more services or boosts taxes.
Josh Shapiro, the Democratic County Commission chairman elected in November, blames "inherited" spending by his predecessors. He said his administration's "responsible" decision to replace the adjustable-rate bonds with fixed-rate bonds at today's near-record-low rates sparked Fitch's trim. Rival Moody's Investors Service still rates Montco AAA but is considering a downgrade, too.
Newly hired county finance director Uri Monson (formerly of Philadelphia's state financial oversight board) told me savings from the refinancing should more than offset any increase in the yield investors may want. The county may borrow an additional $60 million or more in the fall for capital projects.
Good or bad?
The May 4 indictment of Matthew McManus, of Glenside, and Andrew Bogdanoff, an ex-Philadelphian, on federal fraud charges connected with their Remington Financial Group loan brokerage sparked very different reactions from two sets of clients.
"I'm a victim," Ingrid Robinson of San Anselmo, Calif., told me. Robinson said she sent $10,000 to the Remington office McManus headed in the expectation it would help raise funding for a development project she hoped to name after her late daughter. But "they did nothing," she said. Angered, she reached out to other clients.
"They took our money," Gene Teglind, a Minnesota filmmaker, told me. He said he and his partners were bilked for $28,000 in 2006.
But from 2008 to 2011, another firm McManus ran, NAI Bluestone Real Estate Capital, raised millions from banks and investors for at least a dozen Philadelphia-area construction projects.
"I'm shocked" at the charges, Ken Assurian, of Capital Realty Group, Media, told me. Bluestone raised $13 million in Beneficial Bank loans and equity from other investors for the 85-unit Arbors at Buck Run assisted-living community in Feasterville in 2010, Assurian confirmed. McManus "did a good job for us," he said.
Leonidas Addimando, managing partner at Kensington-based 806 Capital L.L.C., also spoke highly of McManus' work helping 806 and its partners finance renovations to the former Robert Morris Building and the former Northeast Hospital. Bart Blatstein, who used McManus to help raise more than $100 million for several Philadelphia projects, was also surprised at McManus' troubles.
Robinson pursued Bogdanoff and McManus, collating complaints for reporters and law enforcement. One who listened: Daniel Kristie, a lawyer with the Pennsylvania Securities Commission. "With my background as an FBI agent, I realized this was something called an advance-fee scheme," Kristie told me. "If you make representations" and charge fees but have no intention of funding clients, "you can be criminally prosecuted."
He told Robinson the FBI wasn't likely to take the case without many victims or big losses. "She worked with us for nine months to get a list of victims" — prosecutors cite 800 — "and a dollar amount" — more than $10 million.
Kristie praised the FBI and federal prosecutors for following through. Bogdanoff and McManus are fighting the charges.
"We're trying to put together a unit in this organization to help local prosecutors get securities fraud prosecuted," Kristie added. Gov. Corbett plans to combine the commission with the state Banking Department, which in the 2000s expanded consumer enforcement but has yet to tackle business fraud.
Contact columnist Joseph N. DiStefano at 215-854-5194, or JoeD@phillynews.com, or follow on Twitter @PhillyJoeD.