PhillyDeals: Bipartisan state, local effort saves the day - and retains a firm

A 2010 Haverford High-Perkiomen Valley field hockey game. Haverford won, but the district's Moody's credit rating has been downgraded two levels.
A 2010 Haverford High-Perkiomen Valley field hockey game. Haverford won, but the district's Moody's credit rating has been downgraded two levels. (MICHAEL S. WIRTZ / Staff Photographer, File)
Posted: February 01, 2012

Action Manufacturing is moving its military electronic fuses and detonators plant from its aging North Philadelphia location - on the St. Christopher's Hospital for Children campus at Front Street and Erie Avenue - to Bucks County.

The loss for Philadelphia might have been a loss for the region: Action boss Arthur Mattia received a personal appeal from North Carolina Gov. Bev Purdue and an incentives offer to move the works and up to 175 jobs south.

Instead, Action bought the 128,000-square-foot former Ferag Inc. printing-equipment plant in Bristol's Keystone Industrial Park for $6.13 million. Brokers Larry Bergen and Andy McGhee of Colliers International, Philadelphia, handled the sale. The company also owns a 200-acre, 75-building explosives plant near Atglen, Chester County.

Why did Action stay? After it confirmed North Carolina's interest in the fall, the company's chief financial officer, Lorraine Prostoff, called State Rep. Tina M. Davis (D., Bucks) "and told me they wanted to stay here," but hadn't found a local site competitive with what North Carolina offered, Davis told me. Davis rang county Redevelopment Authority chief Robert White, who called the Bristol Township director of building planning development, Glenn Kucher. Someone else called U.S. Rep. Mike Fitzpatrick (R., Bucks) for Action; that brought a bipartisan "concerted effort," as county economic-development chief Robert Cormack called it, by fragmented state and local agencies to speed Action into the vacant site, with minimal red tape.

Aides to Gov. Corbett won't say what the state offered to sweeten the move, since the deal has not been officially announced. Since it's in the newly designated Enterprise Zone of Bucks County tax-break district, White said, benefits could include up to $500,000 in state tax relief.

Two notches

Moody's Investors Service has cut the credit rating of the School District of Haverford Township two notches - from "high-quality" Aa2 to "upper-medium-grade" A1 - and threatened further cuts.

Moody's analyst Shannon McCue cited Haverford's "high debt burden," "two years of large operating deficits," and "significant variable-rate and swap exposure," including an interest-rate swap agreement with a Canadian bank that has a current negative value of $6.9 million.

McCue also warned that Moody's might cut Haverford's rating again because recent cost cuts and property-tax increases haven't been enough to balance the budget. Moody's called on the district to "increase reserves and actively manage the district's swaps portfolio."

"Haverford experienced a drain" on its finances during the economic slowdown, even as it was repairing and replacing its aging schools, district business manager Richard Henderson told me. But "we've leveled out over the past two years. Now we're starting an uptick."

"Moody's is looking at our fund balance, which is extremely low," below $200,000, he added. "But we don't have any cash-flow issue. We aren't borrowing to make payroll."

Henderson said he didn't expect the rate cut to boost borrowing costs in the near future. He expects cash reserves to improve this year and hopes Moody's will reconsider its rating next year. And he said it was cheaper for the district to leave the swaps agreement in place than it would be to buy it out now.

Walk away

Philadelphia's slow-growth economy may not have suffered the real estate price inflation of the 1980s, '90s, and 2000s. But it's sharing in the crash: More than one in eight Philadelphia-area investment-grade real estate loans used to back commercial mortgage-backed securities has gone delinquent, according to Horsham-based Morningstar Credit Ratings L.L.C. Recent examples:

Abbotts Square, in Society Hill, faces foreclosure, with a projected loss of $11 million on $25 million in loans.

Citizens Bank Center, Wilmington, has been transferred to a receiver as lenders face losses of $18 million or more on $38 million in loans.

Grant Plaza, in Northeast Philadelphia, where the loss of an Eckerd drugstore and its replacement by a Dollar Tree "at a significantly reduced rate" is in the hands of a bank servicer that is trying to sell or refinance the place.


Contact columnist Joseph N. DiStefano at 215-854-5194, JoeD@phillynews.com,

or @PhillyJoeD on Twitter.

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