Bangkok--25 Sep--Standard & Poor's
Standard & Poor's Ratings Services lowered its long-term rating to 'A+' from 'AA+' on Rosedale-Rio Bravo Water Storage District, Calif.'s water revenue certificates of participation (COPs). At the same time, we assigned our 'A+' rating to the district's series 2011 water revenue COPs. The outlook is stable.
"The lowered rating reflects our view of the district's significantly increased debt load as a result of borrowing to finance a land acquisition, materially diminished projected debt service coverage of 1.1x from over 2.0x, limited rate-setting control over the majority of its revenues, and uneven financial performance demonstrated by negative net revenues in 2010," said Standard & Poor's credit analyst Tim Tung. "Our 'A+' rating on the COPs reflects our expectation that debt service coverage will remain adequate going forward despite the increased leverage and is based on management's representation that no additional borrowing is contemplated over the five-year horizon."
More specifically, the 'A+' rating reflects our view of the district's:
- Significantly increased debt load, with 2011 debt to plant estimated to increase to 73% from 43%;
- Adequate projected DSC of 1.1x to 1.2x over the five-year projection period after adjusting for certain one-time items;
- Limited rate-setting control over the majority of its revenues, with more than 80% of projected revenues derived from long-term water banking agreements with Castaic Lake Water Agency (AA/Stable) and Coachella Valley Water District (A/Stable); and
- Weak financial performance in 2010 resulting in net revenues of negative $207,000.
We understand that the district will use the 2011 COP proceeds to refund water revenue warrants issued in March 2011 to finance the purchase of 2,070 acres of land. The property was acquired to expand the recharge, storage, and recovery capacity of the water system.
RELATED CRITERIA AND RESEARCH
USPF Criteria: Standard & Poor's Revises Criteria For Rating Water, Sewer, And Drainage Utility Revenue Bonds, Sept. 15, 2008
Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site atwww.standardandpoors.com. Use the Ratings search box located in the left column.
Media Contact:
Ola Fadahunsi, New York (1) 212-438-5095,
[email protected]
Analyst Contacts:
Tim Tung, San Francisco 415-371-5041
Paul Dyson, San Francisco (1) 415-371-5079