Standard & Poor's Ratings Services said it has raised its rating on Peace River Manasota Regional Water Supply Authority, Fla.'s debt outstanding to AA-minus from A-plus.
At the same time, it assigned its AA-minus rating, with a stable outlook, to the authority's 2014B and 2015 utility system refunding revenue bonds.
"The upgrade reflects an improved financial picture, highlighted by the authority's two leading customers and members, Charlotte and Sarasota counties," said Standard & Poor's credit analyst Corey Friedman.
The ratings reflect the authority's: strong take-or-pay contracts that, in essence, lock in each customer's water purchases for seven years; step-up provision for debt service charges and fixed costs to be redistributed among customers should one default; a five-year capital improvement plan (CIP) that calls for limited capital needs funded on a pay-as-you-go basis with no additional borrowing; and strong liquidity, with $16.6 million, or 446 days' operations, of available cash and investments at fiscal year-end 2013 (Sept. 30).
The rating is somewhat constrained by the authority's service area that was dramatically affected by the recession, but has recovered in recent years.
Net system revenues secure the bonds. The 2014B and 2015 bonds will refund the authority's outstanding 2005A and 2005B bonds for interest cost savings. The authority recently closed on a direct purchase transaction on its 2014A bonds that would also refund its 2005A bonds. The agency does not view the bond features of the 2014A bonds, which are on parity with the 2014B and 2015 bonds, as a credit concern.
The stable outlook reflects Standard & Poor's expectation that the authority will likely maintain at least adequate fixed-charge coverage based on net operating revenues during our two-year outlook period.
In addition, it bases rating stability on SWFWMD's continued strong financial support and support of the two leading customers, Sarasota and Charlotte counties. Should the district discontinue its support of the authority's capital expansions, and if the authority has to rely on cash reserves and bonding rather than on grants or member contributions to fund capital needs, it would revisit the rating.
It might raise the rating if the authority were able to sustain stronger operating cash flows and fixed-charge coverage levels.
