LOS ANGELES -- California's drought conditions didn't impact Metropolitan Water District of Southern California's bond ratings ahead of its plans to refund $122 million in 2014 water revenue refunding bonds on July 21.
Moody's Investors Service, Fitch Ratings, and Standard & Poor's affirmed Aa1, AA-plus and AAA ratings, respectively. All gave MMD a stable outlook.
Morgan Stanley is lead manager.
The refunding is aimed at reducing The Southern California water wholesaler's outstanding variable rate and swap portfolio, according to the Fitch report released July 2. The proceeds will refund MWD's $40.7 million series 2014 and $9.8 million 2014G and pay the taxable component of the swap termination costs on the $72 million series 2014F. The bonds do not have a debt service reserve fund.
The series 2014G bonds will be issued in the term mode with a final maturity date of July 1, 2037 but are expected to have initial mandatory tender dates of July 1, 2015 through 2018. Metropolitan has the option to require an unscheduled mandatory tender after the call protection dates, set at three months prior to the mandatory tender dates.
"The rating assignment reflects there being no material changes to MWD's credit profile since our last review on May 23, 2014," according to Moody's report, issued July 7.
MWD's current fiscal position includes fiscal 2014 revenue growth modestly above its' February projections, Moody's analysts said.
MWD will be able to meet demand into 2015 with even modest conservation reductions, Moody's said.
"While the drought has not yet materially weakened the district's credit profile, the state's dry conditions will become a larger credit consideration the longer the drought persists," according to Moody's.
MWD provides water to 26 member agencies in a 5,000-square-mile area that includes portions of six Southern California counties.
Rating challenges are highly pressured California water supply environment, substantial variable rate debt exposure and the current sale will not benefit from a debt service reserve fund, according to Moody's.
"The rating reflects our view of such factors as the district's consistently very strong reserve position, strong debt service coverage, critical service nature, and demonstrated willingness and ability to raise rates," said Standard & Poor's credit analyst Paul Dyson in his July 8 report.
MWD water revenue bonds are secured by net water revenues of the district.
