Standard & Poor's Ratings Services said it revised to negative from stable the outlook on its AA-minus school issuer credit rating on Cherokee County School District, Ga.'s general obligation bonds.

"The revision reflects ongoing structural imbalances due to state aid reductions, declining economic trends, limited revenue-raising flexibility, and the absence of a clearly defined plan to restore the fund balance," said Standard & Poor's credit analyst Le Quach.

At the same time, Standard & Poor's assigned its AA-plus long-term rating and stable outlook to the district's series 2012 GO bonds. The rating is based on the district's qualification and participation in the Georgia State Aid Intercept Program as well as added enhancements to the authorizing bond resolution. Standard & Poor's also assigned its AA-minus school ICR and negative outlook to the bonds based on the district's own creditworthiness.

The AA-minus ICR reflects the district's: diverse local area economy, which benefits from its access to and participation in the greater metropolitan area of Atlanta; still very strong wealth and income indicators; good general fund balance levels despite an anticipated significant decline in fiscal 2012; and moderate overall debt burden.

The district's full faith and credit GO unlimited ad valorem tax pledge secures the bonds. The Georgia State Aid Intercept Program provides additional security for bond repayment. The district will use bond proceeds to finance the cost of acquiring, constructing, and equipping Teasley Middle School, completing construction and equipping of E.T. Booth Middle School, and the construction of Dean Rusk Middle School.

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