Water-Sewer Deal on Tap

Henrico County is expected to come to market next week with $72.9 million of water and sewer system refunding revenue bonds in a negotiated deal led by Morgan Keegan & Co.

The proceeds of the Series 2009 bonds will be used to refund portions of the county’s Series 1999 revenue and refunding revenue bonds.

Fitch Ratings assigned a AAA with a stable outlook and affirmed its AAA rating on Henrico’s $103.6 million of outstanding parity bonds, which are secured by a senior lien on net revenues of the system.

Fitch said the AAA rating is based on the system’s exceptionally strong financial performance, rate flexibility, comprehensive long-term capital planning, and a stable and diverse service area.

Analysts said the system maintains ample financial flexibility, but the current economic conditions may hinder the passage of needed rate increases and that could pressure operations going forward.

The county’s exceptional financial performance is evidenced by very high liquidity, debt service coverage, and solid cash-flow margins. Henrico’s forecasting also includes an annual rate increase of 5% beginning in fiscal 2009, which would still keep rates at affordable levels relative to median household income levels for the service area, Fitch said.

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