NEW YORK - Moody's Investors Service has downgraded to A3 from A1 the rating on the city of Williston, N.D.'s outstanding rated revenue bonds secured by the net revenues of the city's sewer enterprise.
Concurrently, the rating has been placed under review for further downgrade or withdrawal. The $160,000 rated debt matures in 2015. The city has an additional $1.4 million in outstanding sewer revenue debt that is not rated by Moody's.
The A3 rating reflects weakened debt service coverage levels that are below the rate covenant and management reluctance to increase sewer rates to satisfy the covenant. The rating also incorporates a growing customer base and low debt ratio.
The ongoing review for further downgrade or withdrawal is prompted by the lack of timely audited financial information and management's failure to comply with the rate covenant.
The city expects to release its fiscal 2010 audited financial statements in April 2012.
Further delay may result in Moody's withdrawal of the rating due to lack of information.
While debt service has been and is expected to be continued to be paid with the city's sales tax revenues, sales tax revenues are not included in the coverage calculation for the rate covenant.
Accordingly, the city has been, and is expected to continue to be in violation of their rate covenant. Moody's views management's failure to comply with the rate covenant to be a material weakness.