NEW YORK - Moody's Investors Service said it has downgraded Red River Authority, Texas’s water enterprise's revenue debt to A3 from A2.
The downgrade affects $2.64 million in outstanding debt. The bonds are special obligations of the authority secured by and payable from a first lien on and pledge of the net revenues of the authority's water system.
The downgrade to A3 reflects the system's failure to produce debt service coverage above the stated 1.1 times rate covenant for the past two audited fiscal years.
The A3 rating also incorporates the use of unrestricted reserves to pay for the deficiency in debt service, which still remains healthy in comparison to the amount of revenue debt outstanding.
Further bond holder security is provided with a fully funded debt service reserve and a satisfactory additional bonds test of 1.25 times average annual debt service.
