S&P: Lineville Waterworks & Sewer Board, AL Revenue Debt Rating Lowered To 'A-' On Updated Criteria; Outlook Stable
The rating action primarily reflects the application of S&P Global Ratings' updated criteria, titled "Rating Methodology And Assumptions For U. S. Municipal Waterworks And Sanitary Sewer Utility Revenue Bonds," published Jan. 19, 2016, on RatingsDirect, particularly with respect to its view of Lineville's economic fundamentals, which the rating service currently views as highly vulnerable.
At the same time, S&P Global Ratings assigned its 'A-' rating and stable outlook to the board's $1.37 million series 2016 water and sewer revenue bonds.
The rating reflects the rating service's opinion of the combination of the board's strong financial risk profile, somewhat offset by what it considers an adequate enterprise risk profile.
"We do not currently expect to change the rating within our two-year outlook period. Currently, we could raise the rating if economic fundamentals were to improve significantly. If the local economy were to expand and diversify, we could also raise the rating, albeit outside our two-year outlook period," said S&P Global Ratings credit analyst Jose Razo. "If the state were to maintain its consent order on the board, leading to capital costs related to reducing ammonia levels and ultimately stressing financial metrics, we could lower the rating further."
The stable outlook reflects S&P Global Ratings' opinion of the area's limited economy but stable financial profile.
Officials intend to use the majority of series 2016 bond proceeds to refund a portion of the board's debt for savings and about $250,000 for capital improvements.