LOS ANGELES — Moody's Investors Service affirmed San Diego Unified School District's Aa3 general obligation bond rating ahead of plans to price on a combined new money/refunding deal totaling $261 million March 31.
The rating applies to $2.3 billion of debt, including the current issue. The outlook is stable.
The new money general obligation bonds will sell in two series: $15.4 million in Series F and $50 million in Series G. The refunding is $195 million.
Goldman, Sachs & Co. is the lead book-runner with Loop Capital Markets and Stifel as co-managers.
The Series F and refunding will be issued as current interest bonds. The Series G bonds will be issued as capital appreciation bonds.
The CABs are subject to redemption in 2024.
"The rating is based in large part on the district's sizable, diverse tax base and improving economy; the voter-approved, unlimited property tax pledge securing the bonds; and the well-established levy and collection history for the debt service," according to the Moody's report.
It also reflects what Moody's analysts called the district's "weak financial position," which analysts expect to remain challenged for the foreseeable future.
One-time real estate sales and the reduction of receivables from the state have stabilized the district's cash position, analysts said, but it has had two consecutive annual operating deficits, further narrowing its fund balance levels.
Reserve levels are also anticipated to decline through 2016.
The district's debt position is currently manageable in size and very straightforward, consisting entirely of fixed rate, voter approved, unlimited tax GO bonds, according to analysts. The district has a considerable amount of authorized debt, which could have a negative impact on the ratings if tax base growth does not offset a rising debt burden ratio.
Bond counsel is Orrick, Herrington & Sutcliffe LLP. The financial advisor is Fieldman, Rolapp & Associates. Disclosure counsel is Fulbright, Jaworski LLP.
