Standard & Poor's Ratings Services said it raised its rating by one notch, to A-minus, on Hardeman-Fayette Utility District, Tenn.'s gas system revenue bonds. The outlook is stable.

"The upgrade is based on the district's solid financial risk profile, including the maintenance of very strong liquidity," said Standard & Poor's credit analyst Theodore Chapman. The upgrade affects about $2.8 million of gas system revenue bonds.

Additional factors that reflect the general creditworthiness of the district include its: annual true-up in rates, rather than an explicit and more regular purchased gas adjustor. While by practice the district's board could implement an intrayear rate adjustment, and its requirements contract with MuniGas lends itself to more predictable wholesale commodity costs, this exposure still lends itself to the district's carrying high cash balances as an additional hedge; limited local economy, with average income indicators and some dependence on the system's principal customers; and strong system equity, with no additional debt plans in the near term.

A first-lien net revenue pledge of the district's gas utility distribution system secures the bonds. A debt service reserve fund of 1.25x average annual debt service provides additional liquidity.

Hardeman-Fayette Utility District is in the southwest portion of the state serving customers in Fayette and Hardeman counties.

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