Standard & Poor’s Monday raised the senior-lien rating on Los Angeles wastewater revenue bonds to AA-plus from AA, and the subordinate-lien rating to AA from AA-minus, in advance of a $360 million refunding.
The city priced $157 million of Series A subordinate-lien bonds on Tuesday, drawing yields of 2.7% on 5% coupons maturing in 2024.
The Series B and C refunding bonds have not been priced yet.
Senior-lien ratings of AA from Fitch Ratings and Aa2 from Moody’s Investors Service were affirmed with stable outlooks.
The subordinate-lien bonds are one notch lower due to narrower debt-service coverage, according to analysts.
Standard & Poor’s analyst Paul Dyson cited the Los Angeles system’s “strong financial performance and recent city council approval of annual rate increases of 4.5% to 6.5% during the next 10 years.”
Los Angeles’ wastewater system serves a retail and wholesale population of around 4 million residents, covering about 600 square miles.
