DALLAS -- Standard & Poor's raised the rating on $10.9 million of utility bonds issued for the city of Sherman, Texas, to AA-minus from A-plus.
"The upgrade reflects Sherman's strong financial profile even after the loss of two major customers," tandard & Poor's credit analyst Alexander Vargas said Dec. 2. “The city responded with rate increases that allowed fixed-charge coverage levels and liquidity to remain strong.’
Bonds for the utility are issued under the name of the Greater Texoma Utility Authority. With a population of about 39,000, Sherman is the county seat of Grayson County on the northern border of Texas near Lake Texoma. Combined population with nearby Dennison creates a metro area of about 120,000 people.
Sherman treats its obligations to GTUA as an operating expense of the retail water and sewer system. A debt service reserve funded in the amount of average annual debt service on all parity bonds outstanding, including these bonds, provides additional liquidity. Proceeds will be used to make improvements to the GTUA wastewater treatment system that serves the city.
“The stable outlook reflects Standard & Poor's expectation that Sherman will
continue to raise rates as needed to maintain at least good financial metrics,” Vargas said. “Officials were able to absorb the loss of two major customers with timely rate increases and we expect this will continue even with the expectation of added debt service requirements over the next five years. We do not expect rating
mobility over the outlook's two-year horizon.”
