Moody’s Investors Service said last week it has upgraded to Aaa from Aa2 roughly $103 million of refunding bonds issued in 2002 by the Ohio Water Development Authority as part of its pure water program.

The rating agency attributed the upgrade to strong debt service coverage provided by the loans securing the bonds as well as the high level of default the program could withstand and still make debt service payments. The OWDA has also recently retired a significant portion of its outstanding debt and does not plan to issue any more debt as part of its pure water program in the future.

The program includes 166 municipal borrowers and $141.4 million in aggregate loans. The borrowers’ loan repayments are generally made five months before the semiannual debt service payments are due, and provide a debt service coverage that is in excess of 1.4 times, Moody’s analyst Thomas Paolicelli noted in the report accompanying the upgrade.

Of the 166 borrowers, 143 have loans less than 1% of the total outstanding loans, while the five top borrowers hold roughly 28% of the loans outstanding. There are no delinquencies in the program.

In addition, the authority has retired a significant portion of its outstanding debt over the last several years, and could suffer a default on 47% of its loans through final maturity of the bonds and still make its debt service payments, Moody’s said. “This lower amount of debt has improved security and is a key driver in the upgrade.”

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