Standard & Poor’s last week upgraded to BBB from BBB-minus Puerto Rico Aqueduct and Sewer Authority Series 2008A and Series 2008B revenue refunding bonds that are guaranteed by the commonwealth.
The rating boost affects $284.7 million of debt. The outlook is stable. Standard & Poor’s affirmed its BBB-minus rating on PRASA’s senior-lien revenue bonds.
The action follows Standard & Poor’s one-notch boost to Puerto Rico’s general obligation bonds on March 7. The agency now rates the $9.2 billion of GO debt BBB. “The upgrade is based on the recent raising of Puerto Rico’s GO rating,” analyst Horacio Aldrete said.
Standard & Poor’s changed the island’s credit rating due to strong excise tax collections. Analysts said the water agency benefits from its close connection to the commonwealth through financial assistance and lines of credit from the Government Development Bank for Puerto Rico. PRASA is the island’s sole water provider, serving four million residents.
Credit concerns include deferred capital needs, low liquidity, water leakage, and operating deficits. “The authority, however, appears to have made remarkable strides over the past two years to restore the system’s financial operations,” Standard & Poor’s said.
PRASA has more than $3.6 billion of outstanding debt.
In other news, the commonwealth’s revenue collections from July through February total $4.3 billion, which is $16 million below budgeted estimates, according to a February revenue report issued by the GDB. Puerto Rico’s revenue is down by $176 million compared to the first eight months of fiscal 2010.
While non-resident withholdings and sales tax receipts are $43 million and $37 million below estimates, respectively, individual tax receipts and property-tax revenues are $31 million and $23 million above budgeted projections, respectively. The island’s new excise tax generated $21 million more revenue than anticipated.
