Bangkok--15 Oct--Standard & Poor's
Standard & Poor's Ratings Services has assigned a 'AAA' bond rating to the Phoenix Civic Improvement Corp., Ariz.'s series 2008 senior-lien wastewater revenue bonds, issued for the City of Phoenix ('AAA' GO rating), and raised the rating on Civic Improvement Corp. senior-lien wastewater revenue bonds outstanding to 'AAA' from 'AA'. At the same time, Standard and Poor's raises its bond rating on junior lien wastewater revenue bonds outstanding to 'AA+' from 'AA-'. The rating changes recognize the essential nature of the pledged City of Phoenix wastewater net revenues, the maintenance of strong coverage of debt service, low rates, and affordable capital plans, with the flexibility to scale back capital plans if population growth slows. The outlook is stable for both liens.
"The ratings reflect our view of Phoenix's large, diverse, and expanding economic base," said Standard & Poor's credit analyst David Hitchcock. Phoenix has very strong 5.19x maximum annual debt service (MADS) coverage on the senior-lien bonds by estimated fiscal 2008 budgetary basis revenues, and strong 1.66x coverage on combined senior- and junior-lien MADS.
Strong system liquidity and financial performance; low wastewater rates, as well as low combined water and sewer rates; and flexibility to scale back the city's large, but manageable, capital improvement plan (CIP), during the current slowdown from the city's previous historically fast population growth trends also support the ratings.
The city is selling the series 2008 fixed rate bonds to refund its series 2004A senior-lien variable-rate issue outstanding, due to recent market disruptions, which have raised short term rates to high levels. A portion of bond proceeds will be used to pay termination fees to unwind interest rate swap agreements associated with the 2004A bonds, which the city currently estimates at $3.2 million under current market conditions.
The stable outlook reflects the expectation of continued strong financial performance levels as Phoenix resizes its CIP to meet fluctuating growth trends. The city's broad and diverse economic base also lends stability to the rating. Maintenance of the rating depends on the system's ability to preserve strong wastewater system liquidity levels in light of the lack of debt service reserves. The retirement of variable-rate debt with this issuance also lends greater stability to the system's fixed costs.
Complete ratings information is available to subscribers of RatingsDirect, the real-time Web-based source for Standard & Poor's credit ratings, research, and risk analysis, at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com; select your preferred country or region, then Ratings in the left navigation bar, followed by Credit Ratings Search.
Media Contact:
Edward Sweeney, New York, (1) 212-438-6634
[email protected]
Analyst Contacts:
David G Hitchcock, New York (1) 212-438-2022
Paul Dyson, San Francisco (1) 415-371-5079