BRADENTON, Fla. — Standard & Poor’s has reinstated its AA-minus rating on DeKalb County, Ga.’s senior water and sewer bonds as the county in suburban Atlanta prepares a nearly $400 million utility system deal.
The new bonds, expected to sell in early December, are rated A-plus and secured by a junior lien on net water and sewer revenues.
Proceeds will be used for various projects, and many are related to a consent decree with the federal Environmental Protection Agency to repair the county’s sewer system. The multi-year project is expected to cost around $1 billion and funded largely with debt.
Standard & Poor’s stunned the bond market in late March when it slashed the county’s general obligation rating to BBB from AA-minus, and withdrew its other ratings for the county. The agency said the county, the third-largest in Georgia, was unable to provide sufficient and consistent information regarding its finances.
“Since the withdrawal of the water and sewer revenue bond rating, the county has instituted monthly cash flow monitoring of its restricted and unrestricted funds in its pooled cash account,” analyst Paula Costa said in a report Wednesday.
The county also provided additional cash-flow management information, and has taken steps to segregate water and sewer funds from the rest of the county’s funds, “thereby mitigating the credit risks related to the utility funds,” she said.
The water and sewer revenue bond ratings reflect the county’s service area, which is in the Atlanta metropolitan statistical area economy and characterized by good income levels. Credit strengths include the system’s financial profile, which has demonstrated fluctuations in recent years relative to debt-service coverage margins and liquidity levels, yet remains healthy, according to Costa.
Tempering credit factors include a $1.3 billion, four-year capital improvement plan driven by regulatory issues, pressure on utility rates with large annual increases the next couple of years, and a moderate debt-to-plant ratio.
DeKalb assistant finance director, Tom Gray, welcomed reinstatement of the ratings. “It indicates the rating agency’s recognition of the county’s efforts to improve its financial position and processes for providing financial information, specifically as it relates to the water and sewerage system.”
Since the county has no current plans for new general-obligation debt, Standard & Poor’s was not asked to reinstate other ratings, he said.
Moody’s Investors Service assigned a Aa3 to DeKalb’s upcoming sale of water and sewer bonds. Moody’s said it downgraded the rating on $567 million of outstanding senior-lien bonds to Aa2 from Aa1, citing a limited debt-service coverage ratio and declining liquidity due to lowering the amount of required cash on hand and leverage associated with the CIP.