Moody’s Investors Service assigned a Aa1 to the Montgomery, Ala., Waterworks and Sanitary Sewer Board’s $35.6 million of water and sewer system revenue refunding bonds, Series 2012, and upgraded the rating on $69.8 million of outstanding parity debt to Aa1 from Aa2.

The bonds are secured by a senior lien on net revenues of the water and sewer system.

The upgrade reflects the system’s sound financial trends, resulting in coverage ratios of more than five times annual debt service, a diverse and growing service area, and manageable debt profile.

The Aa1 rating also factors in satisfactory legal covenants, despite the absence of a debt-service reserve requirement for outstanding debt, given strong liquidity, sound rate-raising flexibility and modest capital needs.

The Series 2012 bonds will advance refund the Series 2005 bonds for an expected net present-value savings of approximately 6% of refunded principal, with no extension of maturity.

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