Moody's Investors Service affirms Los Angeles County's Aa2 issuer rating ahead of $168 million lease revenue bond sale.

LOS ANGELES — Los Angeles County's emergence from the economic downturn with key credit factors intact was cited by Moody's Investors Service in affirming the county's Aa2 issuer rating.

In a Dec. 24 report that affected $7.1 billion in debt, Moody's also assigned an A1 rating to $168 million in lease revenue bonds the Los Angeles County Public Works Financing Authority's plans to issue on Jan. 15.

It also affirmed the county's Aa2 general obligation unlimited-tax rating, which is equivalent to the county's "issuer" rating, and the A1 and A2 ratings on the county's outstanding lease revenue bonds.

The bonds received a stable outlook.

The key positive credit factors cited by analysts included the assessed value, which stands at an all-time high following relatively small declines in 2010 and 2011 and low direct debt and lease burden also remain key positive credit factors.

Moody's cautioned that the unemployment rate remains higher than state and national levels despite labor market improvements, but solid fiscal management that resulted in large surpluses in 2014 and 2014 will further enhance the county's operational flexibility.

The county's reserve levels are generally in line with similarly rated counties, although slightly below their medians, according to the report.

The county's unfunded pension and other post-employment benefits liability represent long term risks for the county's rating but are currently manageable.

The two and three-notch distinction between the county's issuer rating and lease revenue ratings represents the weaker security pledge for lease-backed obligations and the additional risk to bondholders from the county's financial, operational, and economic conditions over the more secure assumed general obligation pledge of the issuer rating, analysts said. Moody's began drawing a distinction between the different types of debt in California in 2012.

"Under California law, a county's GO pledge is an unlimited ad valorem property tax pledge. The county must raise property taxes by whatever amount necessary to repay the obligation, irrespective of the city's general financial position," Moody's analysts said.

Lease payment security is a contractual pledge of the county's available financial resources, subject to abatement of the leased property, which Moody's deems on parity with other unsecured obligations.

"This promise is notably in contrast to the stronger, voter-approved, general obligation pledge that provides a baseline for our estimate of the credit quality of lease pledges, analysts said.

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