BRADENTON, Fla. - Atlanta's water and sewer bonds received a one-notch rating boost from Moody's Investors Service ahead of an upcoming deal.
The upgrade, to Aa2 from Aa3, applies to $2.93 billion of outstanding debt.
The Aa2 rating also applies to $232.14 million of refunding bonds that will be issued next month. The outlook is stable.
"The upgrade reflects the system's stable financial position, characterized by sound coverage and ample liquidity, both of which have been sustained despite significant capital investment, and the demonstrated strong management of the system," said analyst Lauren Von Bargen.
She also said the rating incorporates the essential services provided by the system, an above-average debt burden and moderate variable rate and swap exposure, as well as the city's willingness to raise rates.
Atlanta's water and wastewater system, which is operated by the Department of Watershed Management, has seen improvement in its annual debt service coverage from 1.67 times in 2012 to 1.84 times in 2016.
Moody's upgrade comes amid continuing work on the $4 billion Clean Water Atlanta Program, which is a complete overhaul of the city's water and sewer infrastructure prompted by two federal consent decrees.
In January 2015, S&P Global Ratings raised its Atlanta water and wastewater bond ratings to AA-minus from A-plus, a move that its analysts said highlighted the system's strong financial performance at that time.
Earlier this year, Fitch Ratings affirmed its A-plus ratings on the water and sewer debt, while revising the outlook to stable from positive saying that the city needs to reauthorize a 1% voter-approved Municipal Option Sales Tax beyond its current expiration in 2020 to "secure long-term revenue certainty."
The MOST revenue is used to support the watershed department's program. Although it is not pledged to the water and sewer bonds, it can be considered for compliance with the rate covenant and additional bonds test, Fitch said.
Both S&P and Fitch have been asked to rate next month's refunding, Atlanta's Chief Financial Officer Jim Beard said.
Beard also said that Moody's upgrade supports his belief that the water and wastewater system is in a stable financial position as it continues work on a significant infrastructure investment program.
The city plans to price the refunding on April 25, he said. The preliminary official statement is expected to be released April 11.
Siebert Cisneros Shank & Co. will be the book-runner.
The Department of Watershed Management in 2016 provided drinking water to 153,892 customer accounts in Atlanta, part of southern Fulton County, and portions of neighboring cities and counties.
The wastewater system had 88,912 accounts. The city currently plans about $191 million in capital improvements, according to Moody's.