Beleaguered Wenatchee, Wash. received slight upgrades on its speculative-level general obligation bond ratings from Moody’s Ratings Service, but a triple notch downgrade on $12.7 million in debt.
Moody’s raised the city’s GO rating to Ba1 from Ba2 and its limited-tax GOs to B1 from B2 and gave it a stable outlook.
Moody’s also downgraded the city’s senior-lien combined water and sewer enterprise revenue rating to Baa1 from A1, affecting $2.6 million of unlimited-tax debt, $5.8 million of limited-tax debt and $4.3 million of senior-lien water and sewer debt.
The Baa1 senior-lien water and sewer revenue rating distinction reflects the enterprise’s common management with general city operations mitigated somewhat by an independent rate-setting authority resulting in adequate debt-service coverage levels.
The city triggered a Washington Supreme Court decision limiting the use of a credit-enhancement tool used on hundreds of millions of dollars of bonds in the state.
The case arose after Wenatchee attempted to use a contingent loan agreement to help support a new issuance by a local public facilities district that had defaulted on its bond anticipation notes issued to finance a hockey arena.
The court ruled the agreement would put the city over its legal debt capacity.
Moody’s analysts said the upgrades and outlook reflect diminished but ongoing financial risks following the cure of a recent default on $36.6 million of Greater Wenatchee Regional Events Center Public Facilities District sales tax and revenue bond anticipation notes.
Moody’s analysts said the Ba1 general obligation rating reflects both the recent default and the diminished risks associated with a cure that paid note holders in full but not in a timely manner, as well as recently challenged city financial operations.