Moody's Investors Service said it has upgraded to Aaa from Aa1 the ratings of the Colorado Water Resources and Power Development Authority's drinking water and wastewater subordinate bonds.
The ratings on the bonds remain stable.
The Aaa ratings are supported by the default tolerance of the program, the strength of the loan pool and the benefits of the cross collateralization structure of the Water Pollution Control and Drinking Water programs.
Strengths include a large and diverse pool of borrowers, with a weighted average credit quality in the A-range; default tolerance of 35% on the senior and subordinate lien bonds together, disregarding the investments held with AIG Matched Funding Corporation and Citigroup Global; and cross-collateralization of the Water Pollution Control and Drinking Water programs (surplus funds in one program are available to cure deficiencies in the other program)
After the Clean Water and Drinking Water 2013 A refunding deals close, a portion of reserve funds will remain invested with entities rated at the Baa1, A3 and A2 levels, which is below what is typical for a Aaa rated entity. AIG Matched Funding Corporation has a long term rating of Baa1/Stable. Citigroup Global has a long term rating of Baa2/Negative.
Societe Generale has a long term rating of A2/Stable. However, cash flows demonstrate that even without the support of the reserves from AIG and Citigroup, default tolerance remains high for the senior bonds at 35%.
No reserves are directly pledged to the subordinate lien bonds
The stable outlook reflects Moody's expectation that the credit quality of the combined loan portfolio will be maintained, reserves will not be over-leveraged and management will continue to closely monitor new and existing borrowers.
