S&P raises Louisiana's state highway improvement revenue bonds to AA

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S&P Global Ratings said Friday that it raised the long-term rating on Louisiana's $285.715 million of Series 2013A and 2014A state highway improvement revenue bonds to double-A from double-A-minus.

At the same time, S&P assigned a double-A long-term rating to the state's $202.71 million of Series 2021A taxable state highway improvement fund revenue refunding bonds.

The outlook on the credit is stable.

“The upgrade reflects the demonstrated stability and resiliency of pledge revenues which have provided strong maximum annual debt service (MADS) coverage even through the pandemic-induced recession of 2020,” S&P credit analyst Oscar Padilla said.

“To the extent pledged revenues have proven less sensitive to broader economic conditions, the lingering challenges presented by the public health crisis across the country are not likely to weigh on future pledged revenue growth, in our view,” he said.

The bonds are backed by the state’s registration and license fees and taxes collected on trucks and trailers in certain parishes, including commercial trucks and trailers engaged in interstate commerce.

Floodwater covers a highway after Hurricane Delta hit Louisiana in November.

S&P said it also looked closely at environmental, social and governance factors affecting the state.

“We view the state's social and governance risks as being in line with our view of the sector as a whole. Its environmental risks, however, are above those of the sector, given its vast coastline as a Gulf State, which exposes it to extreme weather events and long-term sea-level rise,” S&P said in a release. “Furthermore, its comparatively greater penetration of energy-related activities from the oil and gas sector and the potential for increasing regulatory challenges or costs as some sectors of the global economy transition to more renewable energy add environmental risk.”

The rating agency said, however, the state had made progress in working toward lessening these hazards.

“In our view, these elevated environmental risks do not necessarily affect pledged revenue collections, which have proven resilient to both economic and environmental shocks,” S&P said. “Given its history of significant natural disasters, the state has worked to develop long-term mitigation and resiliency plans to minimize long-term climate-related risks.”

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