Standard & Poor’s upgraded its underlying rating for King County’s senior-lien sewer revenue bonds to AA-plus from AA, as the county prepares to issue $350 million in new debt.

The rating agency also upgraded the county’s junior-lien sewer revenue bonds to AA-minus from A-plus. King County has $1.5 billion of senior-lien sewer bonds outstanding and $200 million of outstanding variable-rate bonds under its junior lien. It has another $450 million of outstanding debt with a double-barrel limited-tax general obligation and revenue pledge.

“The rating actions reflect, in part, recent progress on and transition to a more stable cost phase of the county’s very large ongoing capital improvement plan,” analyst Gabriel Petek said in a release. “Additionally supportive of credit quality is the county’s demonstrated willingness to incrementally and regularly increase rates and connection charges.”

King County — which includes Seattle — is in the midst of a $3.7 billion capital improvement plan for its sewer system.

Moody’s Investors Service rates the county’s senior-lien sewer revenue bonds A1 but had not assigned a rating to the new bonds as of yesterday.

The county plans to issue $350 million of fixed-rate, new-money bonds in a competitive sale Monday, said Nigel Lewis, the government’s senior debt analyst. The debt will be amortized over 40 years and is not likely to be insured, he said.

King County also plans to refund about $100 million of junior-lien variable-rate demand bonds in October, Lewis said. The rates on the MBIA Insurance Corp.-backed debt have “deteriorated significantly” since the insurer lost its triple-A credit ratings, he noted.

Interest rates on the debt have jumped to as much as 8.5% in recent months from as low as 1.5% before the credit crunch.

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