CHICAGO - Detroit's water and sewer bonds have snagged another upgrade.
This one is from Fitch Ratings, which boosted the $5.2 billion of bonds one notch due to improving operations.
The ratings agency upgraded $1.2 billion of senior-lien water bonds and $1. 8 billion in senior-lien sewer bonds to BBB from BBB-minus. It raised $585 million of second-lien water bonds and $698 million in second-lien sewer bonds to investment-grade BBB-minus from speculative-grade BB-plus.
The bonds had been among Detroit's highest rated before falling to junk status during the city's bankruptcy.
Fitch and Standard & Poor's lifted the senior-lien bonds out of junk territory last year ahead of a tender financing. The latest Fitch upgrade pushes almost $1.3 billion of second-lien debt back to investment grade.
"The one-notch upgrade reflects DWSD's ongoing actions to produce greater revenue stability and improve operational efficiencies, including improvement in current collections," analysts said in Thursday's upgrade report. "As a result, financial results are largely on target despite above-average precipitation during fiscal 2015."
Moody's Investors Service upgraded the water and sewer bonds on Aug. 28, lifting the senior bonds to the investment-grade rating of Baa3 for the first time since before the city filed for bankruptcy in July 2013. The Moody's outlook is positive.
The city is trying to finalize a deal to lease the system, which serves a third of Michigan, to its three surrounding counties for 50 years. The deal has been delayed for years but could be finalized by the end of the year if it wins bondholder approval.
Moody's upgraded the city's general obligation bonds on July 30, lifting them to B2 from B3 and keeping them in junk territory. Standard & Poor's assigned an A rating to a chunk of new income-tax backed bonds the city floated in August, citing a statutory lien and trustee intercept as key drivers, though it still rates Detroit itself deep in speculative-grade range.
