S&P: Arcadia School District, WI BAN Rating Lowered To 'A-' Due to Possible Acceleration Risk
"The lowered rating reflects significant contingent liability risk associated with a bank loan outstanding, which we believe contains certain permissive terms that could lead to immediate acceleration of principal and interest," said S&P Global Ratings credit analyst Kathryn Clayton. "These permissive events of default and immediate acceleration as a remedy, if they were to materialize, would nearly deplete the district's unrestricted cash and available general fund reserves."
The 'A' unlimited-tax GO rating reflects our view of the district's:
Strong market value per capita; Growing enrollment, which is linked to state aid funding; andVery strong general fund reserves. The BANs are not GO debt of the district; the 2019 principal payment is only secured with the authorized issuance of GO bonds or promissory notes. The BANs carry a long-term rating because the maturity was greater than three years when originally assigned. The only interest on the BANs will be paid from either note proceeds or legally available funds, and therefore the BANs are rated one notch off the unlimited-tax GO rating of the district.
The 'A' rating on the 2016 GO school improvement and refunding bonds reflects the unlimited-tax GO pledge of the district. Bond proceeds will be used to finance about $2.12 million of energy efficiency improvement projects at district facilities, and the remaining bond proceeds will be used to advance refund a portion of the outstanding BANs. The district anticipates refunding the remaining balance of the BANs in 2017.