S&P: Clintonville, WI GO Debt Rating Lowered To 'A' On Late Payment
At the same time, S&P Global Ratings assigned its 'A' long-term rating on the city's series 2016A GO promissory notes. The outlook on all ratings is stable.
"The lowered rating action reflects our view of the city's late principal and interest payment, due on March 1, 2016, for its series 2011A and series 2014A GO promissory notes," said S&P Global Ratings credit analyst Andrew Truckenmiller.
S&P Global Ratings understands that management has historically relied on reminders from the Depository Trust Co. for upcoming debt service payments; yet, management said it did not received a notice on this occasion. On March 7, 2016, however, the city received a notice from the Depository Trust Co.(DTC) that it had not made its series 2011A and 2014A principal and interest payment. Management paid debt service on the series 2011A and 2014A bonds on March 8, 2016, five business days later after the required payment date.
"In our opinion, the late payment was due to an oversight by management rather than an unwillingness to support its obligations. The city was reliant on notification from DTC that debt service was due, and when the city did not receive such notification, it did not remember to make the payment," Mr. Truckenmiller said.
Management confirmed that it has since instituted new internal controls, as well as a procedure at the end of every month to review all upcoming debt service payments for the next period. Management reported that three business officials reviewed the documents associated with this new procedure. "While new procedures have been implemented by the city, it is our opinion that reliance on notifications from the DTC in the past, and lack of internal systems which did not trigger upcoming payment dates warrant a lower rating," Truckenmiller added.
The notes are GOs to which the full faith, credit, and taxing powers, without limitation on the rate or amount, of the city are pledged. Bond proceeds will be used to finance capital improvement projects and to refund a portion of the city's outstanding series 2007 bonds.