Moody’s Investors Service downgraded the special obligation revenue bonds of an Overton, Nev., power district from A1 to A2 following a rate covenant default caused by weak financial conditions, according to a rating report.
The downgrade affected $15.7 million of outstanding debt held by Overton Power District No. 5, which serves the unincorporated town located 65 miles northeast of Las Vegas. The bonds are secured by net revenues of the district’s electric distribution system.
In the rating report, Moody’s analysts also said they attributed the downgrade to expectations that the coverage levels will remain pressured given the loss of a major customer, the weakened regional economy, and the highly leveraged nature of the system.
On a positive note, Moody’s analysts cited Overton management’s commitment to restore and maintain coverage levels above that of the 1.25 times rate covenant.