Bangkok--23 Jun--Standard & Poor's
Standard & Poor's Ratings Services assigned its 'AAA' rating to the Arizona Water Infrastructure Finance Authority's $185.96 million water quality revenue bonds, series 2009A. In addition, Standard & Poor's affirmed its 'AAA' rating on the authority's outstanding water quality revenue bonds. The outlook is stable.
"The ratings reflect our view of the large size and diversity of the authority's portfolio of loans, the repayment of which serves as security for the bonds, as well as projected cash flows and debt service coverage that exceed our requirements for the 'AAA' state revolving fund programs," said Standard & Poor's credit analyst Paul Dyson.
Repayments from the local borrowers serve as security on the bonds. Along with funding the debt service reserve fund, proceeds of the series 2009A bonds will be used to provide $133.8 million in funding to local issuers in the form of revolving fund loans for clean water and drinking water improvement projects, referred to as the leveraged portion of the bonds. Proceeds will also be used to refund various outstanding bonds in the amount of $42.7 million and finance $16.2 million of the state's portion of matching funds, referred to as the state match portion (required to be 20% of the amount received in federal grants for the revolving fund programs).
Bond proceeds and repayments are segregated by both state and federal authorizing legislation, which requires that the principal portion of the loan repayments serve only as security on the leveraged portion of bonds and that the interest payments on the loans and investment earnings on other authority investments be used first for the matching fund portion of the bonds, with any excess then available for the leveraged portion of the bonds. Moreover, state and federal statutes require that clean water revolving fund (CWRF) and drinking water revolving fund (DWRF) assets, revenues (including those related to the bond proceeds), and receivables (including those related to loan repayments), be accounted for separately. As such, security on the series 2009A bonds and any particular maturity within the series will be partially derived from each revolving fund (referred to as financial assistance accounts). The authority's credit is bolstered by the allowance in the master indenture of each of the funds to advance funds to one another in the event of an insufficiency in the other. We recognize this structure as one that provides cross-collateralization between the CWRF and the DWRF, while meeting state and federal statutory requirements to account for these funds separately (by creating an obligation of the deficient account to repay the lending account, on a subordinate basis to the bonds).
The Arizona Water Infrastructure Finance Authority is an independent agency authorized by the state to finance water treatment and drinking water improvement projects.
RELATED RESEARCH
USPF Criteria: "Long-Term Municipal Pools," Oct. 19, 2006
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Media Contact:
Ana Sandoval, New York (1) 212-438-5095, [email protected]
Analyst Contacts:
Paul Dyson, San Francisco (1) 415-371-5079
Matthew Reining, San Francisco (1) 415-371-5044