Moody’s Investors Service on Monday downgraded Port St. Lucie, Fla.’s senior-lien utility revenue bonds to A1 from Aa3.

The action affected $441.6 million of outstanding water and sewer system senior debt. Moody’s also downgraded to A2 from A1 the rating on $30.8 million of junior-lien special assessment debt.

The outlook was revised to stable from negative.

The rating drop came ahead of a planned $30 million revenue bond refunding, which is expected to price the week of June 11. An A1 rating was assigned to the refunding.

The downgrade of the senior bonds reflected an escalating debt-service schedule that has outpaced assumed customer growth, and has resulted in narrow coverage levels, said Moody’s analyst Dora Lee.

“The rating also considers the system’s historically sound management practices marked by regular rate increases, sizeable customer base, ample system capacity, and high debt load,” Lee said.

The A2 rating on the special-assessment bonds considers the subordinate basis of a debt-service reserve replenishment mechanism and the credit characteristics of the system.

The population of Port St. Lucie on Florida’s east coast grew by 85% between 2000 and 2010 to nearly 164,000 people. Due to the ongoing weakness of the real estate market and recession, growth in the utility system has slowed significantly, Lee said.

The system’s service area covers about 200 square miles and includes a population of 164,603.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.