Katy ISD, Texas, Upgraded to Aa1 by Moody’s

Moody's Investors Service said it has assigned Aa1 underlying and Aaa enhanced ratings to Katy Independent School District, Texas's $119.4 million unlimited tax refunding bonds, Series 2014-A and $18 million limited tax refunding bonds, Series 2014-B, and upgraded the district's underlying general obligation rating to Aa1 from Aa2, affecting $1.2 billion in outstanding debt.

The outlook is stable. The enhanced rating is based on a guarantee by the Texas Permanent School Fund (PSF).

Proceeds from the current sale will be used to refund certain maturities of the district's outstanding debt for an expected net present value savings with no extension of maturity. The Series 2014-A bonds are secured by an unlimited ad valorem tax on all taxable property within the district.

The Series 2014-B bonds are secured by an ad valorem tax on all taxable property within the district that is limited to $10.00 per $1,000 of assessed value. The lack of a rating distinction between the unlimited tax and limited bonds reflects the districts ample flexibility under the tax rate limit.

The upgrade to Aa1 reflects the district's sizeable and growing tax base, trend of surplus financial operations and maintenance of healthy reserve levels, and strong socioeconomic profile. The rating also incorporates  the district's high, but manageable, debt burden and additional borrowing needs to accommodate growing enrollment.

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