S&P Upgrades Brazos River Authority to AA

DALLAS — Standard & Poor’s upgraded the underlying credit of the Brazos River Authority to AA from AA-minus due to the issuers “maintenance of a strong and likely sustainable financial position.”

The upgrade applies to about $53.5 million of parity revenue bonds outstanding and analysts assigned the higher rating to the authority’s upcoming sale of $22 million of Series 2009 water-supply system revenue bonds. Officials weren’t immediately available to comment on when the bonds will come to market.

Standard & Poor’s said the authority is the raw-water “provider of choice throughout a watershed nearly the size of Tennessee during a time when demand is increasing rapidly from both municipalities and electric power generators.”

Analysts said the authority’s credit strengths include management’s “willingness to adjust rates as necessary to maintain its financial position and fund additional capital projects,” competitive rates, and the regional nature of the entity that “has created such strong demand that historically there is often a wait list for authority water, moderating the risk of customer loss or default.”

“We believe the authority will be able to implement its cost-of-service-based rate structure more fully due to ongoing rapid population growth and announced electric generation projects,” Standard & Poor’s credit analyst Theodore Chapman.

“We also believe this should bolster the water supply system’s already-sound financial position and that management will continue as-necessary rate increases to support its ability to maintain sound financial performance and address long-term capital plan projects,” he said.

Moody’s Investors Service rates the authority at A2, while Fitch Ratings doesn’t rate the issuer’s underlying credit.

The Brazos River basin covers about 42,840 square miles and the 80-year-old authority provides water and wastewater-treatment services to millions of Texans. The more than 600-mile-long service area cuts a wide swath across the state from west of Lubbock in the panhandle near the New Mexico border southeast to the Gulf of Mexico south of Galveston Bay.

First Southwest Co. is the financial adviser to the authority and McCall, Parkhurst & Horton LLP is bond counsel.

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