Moody's Investors Service said it has downgraded to A1 from Aa3 the rating on the general obligation debt of the Twin Rivers Unified School District, Calif., and affirmed the A3 rating on the district's Series 2003 and Series 2007 certificates of participation in connection with the remarketing of the COPs in an extended rate mode.
The rating outlook remains negative.
The downgrade of the GO rating to A1 from Aa3 is due to the material erosion of the tax base over the last 4 years and the narrowing of the district's liquidity.
The resulting A1 rating and the affirmation of the A3 COPs rating favorably incorporates the district's trend of stable operations resulting in a robust general fund balance. Countering this healthy fund balance, the rating factors in the district's narrow liquidity due to the state deferrals, high debt burdens, low wealth levels, challenging economic landscape, and weak debt structure.
The district is in the process of formulating a takeout strategy for their bond anticipation notes that mature in less than one year, with one $39 million payment coming due on April 1, 2014.
While Moody's anticipates that the district will successfully refund the BANs, the negative rating outlook reflects the relatively short timeframe until the notes' maturity, the lack of clarity surrounding the source of repayment of the BANs, and the associated risks and pressures on the district's finances in the unlikely event that no funding is obtained prior to maturity.
The negative outlook also partly reflects the multiple credit pressures that continue to weigh on the district's credit profile going forward including the declining tax base, depressed economic environment, high unemployment, and weak housing market.