Revenue bondholders would emerge unscathed under the proposed Harrisburg, Pa., financial recovery plan, Moody's Investors Service said.

"[General obligation] bondholders would face haircuts while revenue bondholders would not be impaired," Moody's said in a special commentary Aug. 30. "The non-guaranteed revenue bondholders are essentially being treated as secured and will not take any losses under the plan."

The "Harrisburg Strong" plan, which state-appointed receiver William Lynch filed Aug. 26 with the Commonwealth Court of Pennsylvania, mentions no losses for holders of Harrisburg's water and sewer revenue-secured bonds, and calls for fully redeeming the Harrisburg Parking Authority's bonds through a 40-year asset lease.

Moody's rates the parking authority's a junk-level Ba3 with a negative outlook. It rates neither the city nor the water and sewer bonds.

Harrisburg expects to miss its fourth straight GO bond payment on Sept. 15, leaving it $17 million in arrears on GO payments. Its overall debt is estimated at more than $600 million, including $363 million in incinerator bonds.

The proposed restructuring of $70 million in direct GO debt insured by Ambac Assurance Corp. involved extending maturity, "amounting to a distressed debt exchange that will likely result in a lower loss rate than what the guarantors face with the incinerator debt," said Moody's.

By contrast, the water and sewer system, which the Harrisburg Authority manages, has continued with on-time payments. Water and sewer bondholders are not affected under the plan, while the parking lease will cover related debt.

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