S&P: Barnesville, GA Water And Sewerage Revenue And Improvement Debt Downgraded To 'A' From 'AA-' On Application Of Criteria
The rating reflects our view of the combination of an adequate enterprise risk profile and a strong financial risk profile
"We base the downgrade on the application of our revised criteria," said S&P Global Ratings credit analyst Scott Winrow. (See "Rating Methodology And Assumptions For U. S. Municipal Waterworks And Sanitary Sewer Utility Revenue Bonds," published Jan. 19, 2016, on RatingsDirect.)
An adequate enterprise risk profile and a strong financial profile map to an indicative rating of 'a-' in our revenue debt criteria matrix. We have applied a one-notch positive adjustment from the initial indicative rating to arrive at the final rating based on economic indicators and financial metrics more in line with 'A' rated credits.
The enterprise risk profile reflects our view of the system's:Service area participation in the broad and diverse Atlanta-Sandy Springs-Roswell metropolitan statistical area economy;Median household effective buying income thatis low at 74% of national average;Affordable service rates in the context of the service area's income levels; andGood operational management practices and policies. The financial risk profile reflects our view of the system's:Strong historical all-in debt service coverage (DSC) that we expect to be consistent in the medium term given its stable customer base and limited capital needs;Strong historical liquidity position, although low on a nominal basis, that we expect to stay consistent in the medium term;Moderately high leverage position based on a debt-to-capitalization of about 61%, with no additional debt plans in the medium term; andGood financial management policies and practices. Net revenues of the water and sewer system secure the bonds.
We expect the outlook to remain stable over the two-year outlook period. We also expect the system to maintain all-in DSC at levels we consider generally strong and cash levels we consider strong.
Given these expectations and the size of the system, we do not expect to raise the rating during our outlook's two-year horizon. However, if the system strengthens financial metrics, specifically all-in coverage or cash, to levels we consider very strong, we could consider raising the rating.
Conversely should financial metrics erode materially from current levels, we may consider a lower rating.