BRIEF-Flexion Therapeutics announces pricing of $175 mln of senior notes
* Flexion Therapeutics announces pricing of $175 million 3.375% convertible senior notes due 2024
Nov 16 - Fitch Ratings has affirmed the following outstanding Akron, OH (the city) bonds: --'Approximately $196.5 million limited tax general obligation (LTGO) bonds at 'AA-'; --'Approximately $182.7 million CLC income tax revenue bonds at 'AA-'; --'Approximately $16.2 million certificates of participation (COPS) at 'A'. --The Rating Outlook is Stable. SECURITY The LTGO bonds are general obligations of the city, payable from the proceeds of its ad valorem tax levy, subject to the 10.5 mill limitation imposed by the city charter. Income tax bonds are secured by a pledge of the entire 2.25% income tax, including the CLC 0.25% levy dedicated exclusively to the bonds. The series 2005 COPs are secured by lease payments, subject to annual appropriation, for a minor league baseball stadium. In event of non-appropriation, trustee may re-let or re-take the leased property. Leased property consists of a baseball stadium that features the 'AA' minor league affiliate of the Cleveland Indians. KEY RATING DRIVERS ECONOMIC TRANSFORMATION CONTINUES: The city's recovery from the recession has been slow, but due in large part to strong economic development efforts and employment retention, the economy has transformed from a largely manufacturing based sector - particularly rubber that supported the automotive industry - to one based on polymer related industries, health care, education and services. WEAK SOCIOECONOMIC INDICATORS: Population levels continue to decline, income levels are well below average, and poverty levels are almost double those of the state and nation. Unemployment rates, which have historically been above state and national levels, are trending down as a result of the improving economy. STABLE FINANCIAL POSITION: The long-tenured management team has successfully reduced expenses and increased operating efficiencies resulting in general fund financial operations that have strengthened, with recent operating surpluses and increasing year-end balances to the low end of the moderate range. RELIANCE ON INCOME TAX: The city's finances are reliant on economically sensitive income tax revenues which have historically fluctuated with economic cycles and leave the city's finances vulnerable during economic downturns. MIXED DEBT PROFILE: Debt per capita is moderate but debt to full value is well-above average. Mitigating this risk is above average debt amortization and a statutory designation of a portion of income tax receipts for capital needs - offsetting to some degree the need to issue debt. Carrying costs associated with debt service, pension contributions, and other post-employment benefit (OPEB) payments are moderately high but manageable. SOLID COVERAGE ON INCOME TAX BONDS: The 'AA-'rating on the income tax bonds is based upon solid coverage, with 2011 income tax revenues providing 3.4 times (x) coverage of maximum annual debt service. COPS SUBJECT TO APPROPRIATION: The 'A' rating on the series 2005 COPs is based upon the city's obligation, subject to appropriation, to make lease payments for a less-essential asset (minor baseball stadium). CREDIT PROFILE ECONOMIC TRANSFORMATION CONTINUES The city is located in Summit County (LTGO rated 'AA+' by Fitch) in northeast Ohio, approximately 35 miles south of Cleveland. The fifth largest city in the state in terms of population, Akron serves as the economic engine for the immediate area, and augments the regional economy with Cleveland. Historically known as the rubber capital of the world, the rubber industry within Akron, while still noteworthy, has shifted from manufacturing to polymer (plastics and related compounds) research and development, anchored by Goodyear, Bridgestone and A. Schulman. Additionally, higher education and health services lend stability and diversity to the economy, with the presence of the University of Akron and three major health care facilities - Akron Children's Hospital, Summa Health Systems, and Akron General. The city reports it has a proactive approach to economic development, aggressively cultivating promising high-tech and foreign companies and partnering with the county and state to keep local companies such as Goodyear and Bridgestone in Akron. Goodyear and Bridgestone are in the process of completing retention projects that will keep 3,000 Goodyear employees in the city for 25-plus years and 1,000 Bridgestone employees in the city for the 20. WEAK SOCIOECONOMIC INDICATORS The city's population has declined for six consecutive decades, standing at 199,110 in 2010. Socioeconomic indicators are substandard with 2010 individual poverty rates at 168% of the national average, and per capita income levels at 78% and 72% of the state and national averages, respectively. Akron unemployment rates have historically been higher than the state and national rates. Rates jumped from 6.7% in 2008 to 11.0% in 2010, but trended down in 2011 to 9.4%. The September 2012 monthly unemployment rate was 6.1%, lower than the state and national rates of 6.5% and 7.6%, respectively. High housing foreclosures have moderated, decreasing by 55% in 2011 from 2009 levels. Despite the high foreclosure rate, the city did not experience an appreciable decline in property tax collections, which have averaged 97% over the last three years. IMPROVED FINANCES RELY HEAVILY ON INCOME TAX COLLECTIONS City finances have improved in recent years, with operating surpluses after transfers in 2010 and 2011 following deficits in 2008 and 2009. The city's fiscal year coincides with the calendar year. For 2011 the city implemented GASB 54, reporting an unrestricted general fund balance (sum of committed, assigned, and unassigned) of $9.1 million or 6.5% of spending compared to an unreserved balance of $5.0 million or 3.5% of spending in 2010. The unassigned general fund balance stood at 5.9% at December 31, 2011, above the city's 5.0% threshold. Fitch believes this threshold is somewhat low given the volatility and lack of predictability of the city's main revenue source. After holding relatively steady since 2008, the city's 2012 assessed value declined by 10% from 2011 due to revaluation. Property taxes only account for about 11% of general fund revenues, somewhat mitigating the impact of the declining value. The city charter provides that the maximum total tax rate that may be levied without a vote for all purposes is 10.5 mills. The city has been levying at 10.3 mills since 2005, leaving the city little flexibility for an increase. The city has no voted levies. Economically sensitive income tax revenues, which accounted for approximately 54% of total 2011 general fund revenues, increased by 6.9% in 2011 due to improving economic conditions, after declining 6.9% and 1.0% in 2009 and 2010, respectively. Year-to-date, income tax collections are up 5.0% from 2011. Based on current budgetary performance, the city expects a 2012 ending general fund balance of $5.3 million, relatively unchanged from 2011 results. Given management's history of conservative budget practices, Fitch believes the projections to be reasonable. The city's 2013 budget is not currently available. The city manages cash flow by pooling cash across funds, but end of year general fund liquidity has been consistently narrow. To counter the revenue declines, management has enacted numerous expenditure reductions over the past few years, including staff reductions, mandatory and voluntary furloughs, and reductions of overtime and longevity payments. Current employees total approximately 1,740, a 25% reduction since 2008. The staff reductions were the first mandatory layoffs in 27 years, demonstrating Akron's willingness to make difficult decisions to achieve financial health. In addition, the city has consolidated several services and departments - building inspection and health department, for example - with Summit County and is currently collaborating with the county to identify areas of savings including purchasing, information technology and fleet management. Effective Sept. 30, 2011, the state auditor declared the city in fiscal caution, the lowest level of fiscal oversight. The auditor cited accounting procedures related to the large number of funds and cash deficits in several funds. The city has submitted timely written proposals of corrective action to the State Auditor, has consolidated funds and implemented accounting procedures to minimize the number of funds with negative cash balances as evidenced by a 45% reduction in the number of funds and 84% reduction in the dollar amount of the negative balances. Management reports the remaining cash deficits will be eliminated by the end of 2013 via increased fees and/or increased subsidies from the general fund. MIXED DEBT PROFILE Akron's overall debt per capita is moderate at $3,693 but debt to full value is well-above average at 8.7%. This is somewhat mitigated by above average amortization with 66% retired in 10 years. Additionally, substantial increases in general obligation debt levels are not anticipated due in part to a statutory designation of 27% of the basic 2% income tax that is used solely for capital improvements. The city provides pension benefits through state-administered plans and funds 100% of its annual required contribution. Total carrying costs including debt service, required pension contribution, and OPEB payment requirements are moderately high at 25.4% of total government fund expenditures, but manageable.
* Flexion Therapeutics announces pricing of $175 million 3.375% convertible senior notes due 2024
* Priced offering of $450.0 million aggregate principal amount of 2.25% convertible senior notes due 2024 Source text for Eikon: Further company coverage: