NEW YORK - Moody's Investors Service said it has downgraded North Branch Water and Light Commission, Minn.'s water enterprise revenue bond rating to Baa1 from A2.

The rating affects $11.8 million of outstanding water system revenue bonds which are secured by the net revenues of the utility.

The downgrade to Baa1 reflects the system's deteriorated financial position, with debt service coverage levels that fell below the rate covenant and have not been sum sufficient since fiscal 2009.

The significant drop in coverage is due largely to insufficient rate increases that did not meet increasing debt demands and general revenue slowdown, specifically with connection charges.

The rating also incorporates the city's residential customer base with declining usage, healthy net working capital position, and above average debt ratio.

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