Fitch Ratings downgraded Orlando, Florida's $180 million of outstanding Series 2017A senior tourist development tax revenue bonds to BBB-minus from BBB due to the effects of the COVID-19 pandemic.
Fitch said Tuesday's downgrade reflects “
The rating outlook remains negative.
The Series 2017A TDT revenue bonds are a limited obligation of the city and are backed by a senior lien on 50% of the 6th-cent TDT. This is a one-cent tax on hotel room charges levied throughout Orange County and remitted by the county to the city according to an inter-local agreement.
On hand revenues are expected to cover the May 1 interest-only payment, but Fitch said it expects the city may have to dip into existing reserves to cover some of the Nov. 1 principal and interest payments.
“The anticipated reliance on reserves to meet upcoming debt service payments further weakens the bond structure's resilience heightening its sensitivity to the strength and timing of the TDT recovery,” Fitch said.
Fitch said the negative outlook reflects “an ongoing risk to vaccination setbacks and confirmed cases as well as uncertainty around the easing of hotel/park restrictions and headwinds facing leisure and corporate travel demand.”
Still, Fitch said it is anticipating a gradual recovery in the tourism sector.
“TDT revenues continue to languish well below historical levels and have not conclusively demonstrated a path to pre-pandemic trend. However, Fitch believes the long-term fundamentals of the Orlando tourism market remain sound,” Fitch said.
The rating agency expects the key driver of TDT revenue, theme park attendance, will gradually recover to pre-pandemic levels as capacity restrictions ease and vaccination rates rise.
It noted that Universal said it will resume construction work on its fourth Orlando theme park, Epic Universe, continuing a trend of investment in hotel and theme park properties.
From March 14 to March 28, Orange County reported 4,589 COVID-19 cases with 224 being new cases, and 1,182 deaths through the entire pandemic.
