BRADENTON, Fla. - Atlanta won a rating upgrade and positive outlook ahead of a planned $1.25 billion water and wastewater refunding.
Standard & Poor's raised its rating Jan. 22 to AA-minus from A-plus on about $3 billion in outstanding water and sewer revenue bonds citing the city's strong financial performance, high liquidity, and a large pay-as-you-go capital program.
S&P also assigned the AA-minus rating to the upcoming refunding, which is expected to price Feb. 23-24. The outlook is stable.
Fitch Ratings assigned A-plus ratings to the refunding bonds, and revised the outlook to positive from stable due to improving financial metrics, cost controls, and relatively stable sales at the Department of Watershed Management, which oversee the wastewater program.
Moody's Investors Service has assigned an Aa3 rating, and stable outlook, to the bonds.
"The Department of Finance is pleased that the rating agencies have recognized the work of the city to provide world-class water and wastewater services to our customers," said finance director Jim Beard. "We continue to refine our pay-as-you-go model to enable the Department of Watershed Management to meet its operational objectives without upward pressure on rates in the foreseeable future."
Beard said that over the last five years, the city has concentrated on improving finances and operational efficiencies in order to give the DWM "the flexibility to invest in water and wastewater assets in a balanced manner."
Because of the split ratings, Beard said the city may not see additional savings on the planned refunding though S&P's upgrade and Fitch's positive outlook "will certainly improve the market perception of the water and wastewater bonds."
The preliminary official statement for the negotiated offering is expected to be released Feb. 16.
Currently, the deal is estimated to bring about $141.2 million or 10.82% in present value savings to be taken over existing maturities, Beard said.
Proceeds will be used to refund about $231 million of 2001A bonds, $479 million of 2004 bonds, and $596 million of 2009A bonds.
First Southwest Co. is the financial advisor for the water and sewer deal. Loop Capital Markets and Goldman, Sachs & Co. are joint book-runners.
Hunton & Williams LLP and Nowell Sparks LLC are co-bond counsel. Greenberg Traurig LLP and Riddle and Schwartz LLC are co-disclosure counsel.
Atlanta has issued a substantial amount of debt to address federal consent decrees for its wastewater system. After making significant progress on improvements, the term of the remaining decree was extended an additional 13 years and must be completed by 2027.
The five-year capital improvement plan totals about $950 million for general system improvements and projects related to the consent decree. The city plans to fund the CIP from fund balances.
The city may use a commercial paper program for temporary financing, and may seek a loan from the Georgia Environmental Finance Authority. No long-term debt is currently anticipated.
