BRADENTON, Fla. - Moody’s Investors Service does not anticipate disruption of debt-service payments or changes in ratings or outlook on issuers in Louisiana and Mississippi affected by Hurricane Isaac, the agency said Monday.
Isaac made landfall on the coasts of the two states Aug. 28 as a category 1 hurricane with sustained winds of 80 miles per hour. A major disaster declaration was issued on Aug. 29, and nine Louisiana parishes and four Mississippi counties became eligible for public and individual assistance from the Federal Emergency Management Agency.
Insured property damage estimates currently range between $500 million and $1.5 billion, according to Moody’s analyst Keaton Hoppe.
Moody’s rates 28 local government issuers in both states with a combined total of $1.85 billion of outstanding debt.
Issuers in declared areas can qualify for reimbursements from FEMA for up to 75% of clean-up costs. In addition, the state of Louisiana has offered to allow local governments to explore various financing options quickly, including revenue anticipation notes backed by future federal aid reimbursements to provide short-term liquidity.
The Louisiana State Bond Commission will consider its first request related to Hurricane Isaac at its meeting Thursday. The city of Plaquemine will request authority to issue up to $1 million of taxable revenue bonds to pay for capital and operating expenditures incurred in connection with the storm.
“Although much of the expense associated with Hurricane Isaac will be reimbursed by FEMA, immediate expenses are typically the responsibility of local governments,” Hoppe said. “We anticipate at least 75% of the associated cleanup and recovery expenses within the declared disaster areas to be reimbursed by FEMA, although the timing of these reimbursements can vary widely.”
After talking with issuers and reviewing their finances, “We do not anticipate debt service interruptions related to the storm nor do we currently anticipate any rating or outlook changes,” Hoppe said.
Moody’s said it will continue to evaluate impacted issuers as the full assessment of damage is known and a greater estimate of disaster related expenses is determined.
The rater said six issuers in the 13 most-affected parishes and counties with limited near-term liquidity because of general fund balance as a percentage of revenue or net working capital as a percentage of operations and maintenance expenditures have been identified.
The issuers with the largest outstanding portion of rated debt, at a combined $883 million, are the city of New Orleans and the New Orleans Sewerage and Water Board. New Orleans general obligation bonds are rated A3 with a negative outlook by Moody’s. The Sewerage and Water Board’s sewer revenue bonds are rated Baa1 with a negative outlook and water revenue bonds are rated Ba2 with a stable outlook.
“Officials from New Orleans have stated that the improved federal levy system protecting New Orleans performed as expected and largely prevented the devastating flooding and related damage that was associated with Hurricane Katrina,” Hoppe said. “Some street level flooding has been reported, but officials indicated this is typical of major storms in New Orleans.”
The Sewerage and Water Board’s systems also performed reliably and effectively throughout the storm, Hoppe said.