Moody's Investors Service said it has upgraded Maryland Community Development Administration's local government infrastructure bonds (Mayor and City Council of Cumberland issue), Series 2011A to Aa1 from Aa2.

The outlook is stable.

The rating upgrade affects approximately $12.2 million in outstanding debt.

The bonds are secured by loan payments backed by a general obligation pledge from the city of Cumberland (not rated by Moody's) and by the Maryland Infrastructure Financing Intercept Program (rated Aa1/stable outlook). Proceeds were used to refund the Series 1999, Series 2005, Series 2006, and Series 2007 Public Improvement bonds that were originally issued to support various capital improvements related to the city's water and sewer system.

The upgrade to the Aa1 rating primarily reflects the credit quality of the state intercept program. In addition, the rating also reflects a sound legal structure that requires a cash-funded debt service reserve fund (DSRF) and for Cumberland to pay the debt service 30 days prior to the due date; both of which provide additional security to bondholders.

Overall, Moody's believes these rating factors offset the weakness in the underlying credit quality of the City of Cumberland. Even if Cumberland were to miss its Maximum Annual Debt Service (MADS) payment, cash from the debt service fund and from interceptable state aid would more than cover the debt service payment. In addition, if this were to happen, after debt service was paid, interceptable aid would be more than sufficient to replenish the DSRF before the next debt service payment date.

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