Standard & Poor’s downgraded its underlying rating on the Oxnard Financing Authority’s wastewater revenue bonds four notches to BBB from A-plus. The Dec. 29 action affects $138.9 million of outstanding debt secured by net revenues of Oxnard’s wastewater system.
“The lowered rating reflects our view of the wastewater system’s multiple breaches of what we consider a weak rate covenant, reliance on one-time revenues to generate adequate coverage in recent years, and upcoming capital improvement plans that will require additional borrowing and substantial rate increases,” Standard & Poor’s credit analyst Tim Tung said in a news release. The outlook is stable.
At the same time, S&P lowered its rating to AA-plus/A-1 from AAA/A-1-plus on the authority’s Series 2004B variable-rate demand wastewater revenue bonds.
The long-term rating component on the bond series reflects the combination of the wastewater system’s creditworthiness and credit enhancement in the form of a letter of credit provided by Union Bank NA, which has an A-plus/A-1 rating from Standard & Poor’s.