DALLAS — Standard & Poor’s has lowered its rating on the Albuquerque Bernalillo County Water Utility Authority’s revenue bonds one notch to AA-plus with a stable outlook.
The downgrade affects $443 million of senior-lien revenue bonds issued by the authority in New Mexico’s most populous metropolitan area.
“The downgrade reflects several consecutive years of weak debt service coverage and a steady decrease in working capital,” said Standard & Poor’s credit analyst Theodore Chapman.
The utility agency serves more than 200,000 metered accounts in the Albuquerque area and is still seeing about 3% growth per year, Chapman said.
Fitch Ratings downgraded the utility’s senior debt to AA from AA-plus on July 22, 2011, and revised the outlook to negative.
In addition to noting late reporting of comprehensive annual financial reports since 2006,
Fitch analysts also attributed deterioration in debt service coverage to “a slowdown in housing starts and resulting decline in connection fees, rising operating costs related to power and chemicals, reduced investment earnings, and increased conservation leading to a reduction in water sales.”
Moody’s Investors Service last rated the authority’s senior revenue bonds Aa1 with a stable outlook in 2009.
Officials at the authority attribute the weaker financial performance to reporting delays by the city of Albuquerque.
The agency shares its financial accounting information system with the city.
Ultimately, the delays resulted in rate-adjustment decisions that reduced debt-service coverage below the 1.33 times annual rate covenant for three years, though the authority is expected to restore that coverage level through rate hikes, Chapman wrote.
