LOS ANGELES — Moody's Investors Service on Feb. 18 upgraded Orange County Sanitation District, Calif., certificates of participation to Aa1 from Aa2, affecting $392.1 million in debt.
The upgrade affects three series of COPs: Series 2007A refunding COPs with $92.6 million outstanding; Series 2007B with $273.4 million outstanding; and Refunding COPs Series 2008B with $26.1 million outstanding as of June 30, 2013.
The certificates are secured by a senior lien on net system revenues, on parity with eight other outstanding COPs totaling $882.9 million which are not rated by Moody's but considered by the rating agency's analysis.
The district has $1.3 billion of total debt outstanding as of June 30, 2013.
The upgrade to Aa1 from Aa2 reflects improvements to the district since the previous review as well as the continued stability of the district's credit profile, according to the report.
Since the last review, the district completed its capital improvement plan, which has resulted in the full implementation of secondary treatment at its two plants in December 2013. Providing full secondary treatment eliminates the risk posed by the required renewals of a waiver from clean water regulations it had previously required.
The waiver, which was subject to renewal very five years, allowed the district to provide a lower treatment level than required of almost all other treatment plants in the country.
The district also has refunded all of its variable rate debt and swap instruments since the rating agency's last review. While the district has issued a large amount of total debt to fulfill its capital improvement plan, all of the district's outstanding debt is fixed rate with relatively stable debt service payments. The fundamental change in these credit factors is reflected in the upgrade, according to the report.
Additionally, the upgrade reflects the district's large and stable service area that should remain strong in the long-term and its strong financial management which has consistently resulted in healthy financial performance. The rating also incorporates projections for strong debt service coverage going forward and the expectation that the district will issue very little future debt.
