Moody's Investors Service has upgraded the rating to Aa3 from A1 on the village of Hodgkins, Ill.'s Metropolitan Biosolids Management project's environmental improvement revenue bonds (MBM Project) Series 2002.

The outlook has been revised to stable. The Aa3 rating and stable outlook apply to $36.6 million of outstanding debt.

The bonds are secured by a gross pledge of all service agreement payments from the Metropolitan Water Reclamation District of Greater Chicago (general obligation rated Aaa/stable outlook). Additionally, the bonds benefit from a debt service reserve funded to Maximum Annual Debt Service (MADS).

The Aa3 rating assignment is based on the strong credit quality of the district and notched down due to operational lease risk and enterprise volatility associated with the project as well as the still limited revenue output since achieving certified functionality.

Upon meeting the terms of the Service Agreement stipulated after passing certification tests, the district is required to pay the vendor, Veolia Environnement S.A. (rated Baa1/stable outlook) a monthly fee for 228 months (last 12 months of debt service is deposited in escrow).

Currently, the district is paying the debt service to the trustee per the Veolia's request. The district's responsibility is to the vendor for the capital lease payments. Veolia still guarantees the bonds to the trustee.

Up until certification, Veolia had been paying debt service under a construction and operating performance guaranty since April 2004.


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