Standard & Poor's Ratings Services said it lowered its underlying rating on Stevenson Utilities Board, Ala.'s utility system revenue debt three notches to BBB-minus from A-minus.
The outlook is negative.
The downgrade reflects Standard & Poor's opinion of the board's weak financial performance in fiscal years 2012 and 2013, evidenced by its inadequate debt service coverage and failure to abide by the rate covenant based on Standard & Poor's calculation.
"If total debt service coverage were to remain, what we consider, inadequate in fiscal 2015 despite the recent rate increase in fiscal 2014, we could lower the rating within the outlook's two-year period," said Standard & Poor's credit analyst Scott Sagen. "Due to the board's current weak financial performance that could continue despite recently adjusted utility rates, we do not expect to raise the rating over the outlook's two-year period."
The negative outlook reflects the rating service's view of the system's weakened finances that will likely take time to reverse.
The board's net revenue pledge of its waterworks, sewer, and natural gas systems secures the bonds. Board officials used series 2009 bond proceeds to refund the system's series 1998-A utility revenue bonds, refund several taxable loans, and finance the construction of various capital improvements to the board's systems.
