Portland, Oregon's plans to price $585.6 million in second lien water system revenue and refunding bonds are bolstered by a recent upgrade from S&P Global Ratings.
The agency raised the rating Friday on the city's outstanding second-lien parity water revenue bonds to AA-plus from AA, while also assigning an AA-plus rating to the upcoming series 2026A bonds.
The
City officials have called Bull Run city's largest infrastructure project historically.
"Projects like filtration are critical investments in the livability, health, safety, and prosperity of our city," Portland Mayor Keith Wilson said in a
The city hasn't published preliminary offering documents for the debt of announced a sale date.
Although Portland benefits from a highly protected watershed, S&P said it views the
S&P affirmed first-lien revenue bonds at AA-plus, putting them at rating parity with the subordinate lien.
"The upgrade on the water system's subordinate-lien debt reflects our view of management's stated plan to cease issuing debt under its first lien and the low nominal amount of first-lien debt relative to second-lien debt, which we believe does not prejudice subordinate-lien bond holders," the rating agency said.
The S&P outlook for the bonds remains stable.
Moody's Ratings on Thursday assigned a Aa2 rating to the proposed second-lien bonds, while affirming the city's existing Aa1 first-lien and Aa2 second-lien ratings with a stable outlook.
In its assessment, Moody's pointed to the system's regional importance, strong liquidity with approximately 400 days of cash on hand, and healthy debt service coverage as foundational strengths.
Post-sale, Moody's said, the system will have around $1.7 billion in outstanding debt.
Proceeds from the bond issuance are earmarked to support the city's substantial capital improvement program, specifically upgrades to the Bull Run water treatment facility.
The bonds are secured by a second lien on net revenue from Portland's water system, which is managed by the city's water bureau. They are being issued to finance capital improvements to the water system and refund the city's series 2016A bonds, of which $94.1 million are outstanding, S&P analysts wrote.
This infrastructure project is a critical component of Portland's regulatory compliance and long-term resiliency strategy, intended to address potential contaminants and mitigate climate-related risks. The water system faces an extensive capital improvement plan totaling roughly $1.9 billion through fiscal 2032.
Despite the heavy debt burden associated with these large-scale borrowings, which is expected to see leverage hover around six times, the rating agencies have maintained confidence in Portland's financial management.
The city has demonstrated a consistent ability to implement necessary rate increases to support its operational requirements and maintain debt service coverage, Moody's said.
Moody's analysts anticipate that the city will continue to meet or exceed its internal financial targets throughout the construction period, viewing the water system's financial metrics as solid even with the elevated leverage.
The city has also borrowed
