Standard & Poor's Ratings Services said it raised its ratings on Corpus Christi, Texas' senior-lien and junior-lien utility system debt one notch to AA-minus and A-plus, respectively.
It also assigned its A-plus rating to the city's series 2015A and 2015B variable-rate junior-lien utility system improvement bonds. In addition, it raised the rating one notch to AA-minus from A-plus on Lavaca-Navidad River Authority's (LNRA) water supply contract revenue bonds, issued for its Lake Texana project.
Because LNRA retains the right under its water contracts to adjust rates at any time without limit, and because Corpus Christi is the "strong link" in joint and several analyses, S&P correlates the LNRA with the senior-lien debt rating on the city.
Lastly, S&P raised the rating on Nueces River Authority's series 2005 contract revenue bonds by one notch, to AA-minus. The rating change is also based on the upgrade of Corpus Christi's senior-lien debt.
"We raised the ratings on Corpus Christi's debt based on our expectation that the city's financial capacity is strong enough to support additional debt - mainly to address anticipated regulatory mandates," said Standard & Poor's credit analyst Theodore Chapman.
The city is currently negotiating a final consent decree with the U.S. Department of Justice to address the Environmental Protection Agency's allegations that it is in violation of the federal Clean Water Act.
The allegations are related to an overall directive to address sanitary sewer overflows (SSO) in the city's collection system. The city is also expected to invest significant resources in its wastewater treatment plants to ensure each of the six is compliant with discharge permit requirements. The wastewater system efforts come as the city is in the final stages of enhancing its long-term water supply with a major new pipeline to an existing reservoir.
The 2015 bonds are secured by a pledge on the net revenues of the city's waterworks, gas and sanitary sewer system, subordinate to its prior-lien debt.
Currently, the city has $289.3 million in prior-lien debt and $610.7 million in junior-lien debt, which includes an expected additional issuance later in 2015. The series 2015A and 2015B bonds will be used to fund the next phase of a new water transmission line that will bring additional capacity from Lake Texana to the city.
