Standard & Poor’s last Friday upgraded its underlying rating on the San Diego County Regional Transportation Commission’s sales tax bonds to AAA from AA.
“The rating reflects the commission’s very strong debt service coverage that could withstand declines due to economic weakening,” Standard & Poor’s credit analyst Ian Carroll said in a statement. “In addition, the commission has a practice of using 60% of its pledged revenues for grants to local recipients — effectively translating into a 2.5 times additional bonds test.”
The upgrade comes as the commission, better known as SANDAG, prepares to issue $600 million of new debt next month.
The bonds will be the first sold under a voter-authorized extension of a half-cent sales tax for transportation that was approved in 2004.
The Series 2008 bonds will be used in part to defease all outstanding debt, and to finance the commission’s capital needs, according to Standard & Poor’s.
When SANDAG began planning the bond issue last year, it planned to issue $300 million of auction-rate securities and $300 million of variable-rate demand obligations, said Renee Wasmund, the commission’s finance director.
“Now, given what’s going on in the market, we’re going with all variable-rate demand obligations,” she said Wednesday.
The deal is scheduled to close March 20. SANDAG is still evaluating bids from liquidity providers, Wasmund said.