Cross Anchor UD, Tenn., Lowered to A-Minus by S&P

Standard & Poor's Ratings Services said it lowered its underlying rating one notch, to A-minus from A, on Cross Anchor Utility District, Tenn.'s series 2010 waterworks revenue refunding bonds.

The outlook is negative.

"The downgrade reflects our assessment of the district's deteriorating financial profile due to a sudden decrease in net revenues for fiscal 2012," said Standard & Poor's credit analyst Alexander Vargas. "Debt service coverage for fiscal 2012 dropped to an inadequate 0.86x coverage, down from 1.42x in fiscal 2012." In addition, the district's already low liquidity position decreased 11% to $475,171 for fiscal 2012.
The rating reflects the district's: stable and primarily residential customer base; and moderate system indebtedness.

These factors are partially offset by the district's: relatively limited economy with low income levels for the area and relatively high unemployment; and reactive rate-setting approach.

The district's net operating revenue pledge of its waterworks system secures the bonds. The district is prohibited by resolution from issuing parity debt on its series 2006 senior-lien bonds. Therefore, the senior-lien is closed, and the series 2010 bonds are considered the working lien.

Cross Anchor Utility District is located in northeastern of Tennessee in Greene County, about 70 miles northeast of Knoxville.

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