Standard & Poor's Ratings Services said it lowered its long-term rating on North Kern/Cawelo Financing Authority, Calif.'s water revenue bonds to A-plus from AA-minus.
At the same time, it assigned its A-plus long-term rating to the authority's series 2015A water revenue bonds, issued on behalf of North Kern Water Storage District. The outlook is stable.
"We are lowering the rating on the authority's water revenue bonds based on continued high volatility in financial performance, particularly the significantly insufficient debt service coverage of negative 7.9x in 2013," said Standard & Poor's credit analyst Tim Tung.
The rating reflects the district's: highly volatile financial performance primarily attributable to variations in hydrology, with debt service coverage ranging from negative 7.9x in fiscal year 2013 to positive 13.7x in fiscal year 2011; concentrated customer base, with the leading 10 customers providing about 89% of 2014 water sales revenues; and service area industry concentration entirely in agriculture.
The district is issuing the series 2015A bonds to fund capital improvements to the water system.
