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Rating Action:

MOODY'S DOWNGRADES TO Ba3 FROM Ba1 AND WITHDRAWS THE RATING ON HARRISBURG AUTHORITY'S (PA) $69.4 MILLION WATER REFUNDING BONDS, SERIES OF 2008

Global Credit Research - 15 Nov 2011

New York, November 15, 2011 -- Moody's Investors Service has downgraded to Ba3 with negative outlook from Ba1 the rating on The Harrisburg Authority's $69.4 million Water Refunding Bonds, Series 2008. We have subsequently withdrawn the rating. The bonds are secured by net revenues of the authority's water system. These actions conclude our review begun in October, 2011. We do not maintain a rating on the City of Harrisburg's general obligation debt.

SUMMARY RATING RATIONALE

The downgrade to Ba3 from Ba1 reflects a narrowing of the water system's liquidity and heightened risk of a disruption to financial operations given the city's ongoing financial distress and recent bankruptcy filing. It also incorporates uncertainty surrounding the water system's insulation from any plans for fiscal recovery by the city. Exposure to these risks stems from the authority's, relationship to the city as operator of the water system and its governance structure. Water system funds are held separately from other authority operations, including the resource recovery operations.

The negative outlook factors additional weakening to the water system's financial operations as a result of the city's bankruptcy filing, which is being legally contested, or any fiscal recovery plan.

Withdrawal of the rating reflects the lack of sufficient financial information, specifically the issuer's failure to release its 2009 and 2010 audited financial statements. This action concludes our review.

STRENGTHS

-Approximately 191% of annual revenues held in reserves, including debt service reserve funds

-Frequent monitoring of revenues and expenses by management

WEAKNESSES

-Uncertainty surrounding City of Harrisburg's bankruptcy filing on water system financial operations

-Uncertain liquidity position given a lack of audited financial statements

-Political unwillingness to raise water rates

-Declining debt service coverage levels

-Management of operations and billing by distressed City of Harrisburg

OUTLOOK

The negative outlook reflects our view that near-term events may further impair the water system's financial health. These events include increases in general administration fees, failure to modify rates as needed or the employment of a fiscal recovery solution that negatively affects water system operations. The outlook also considers the possibility that the city's bankruptcy filing may be upheld and water system liquidity or assets are adversely affected.

WHAT COULD MOVE THE RATING (UP):

-Improved financial operations at city level

-Implementation of financial recovery solution for city and resource recovery facility that does not negatively impact water system operations

WHAT COULD MOVE THE RATING (DOWN):

-Actions related to the city's financial distress or recovery that could negatively affect the water system's operations

-Bankruptcy Court ruling that upholds the legality of bankruptcy filing

-Employment of fiscal recovery solution that negatively affect water system financial operations

-Narrowing of water system's financial debt service coverage or liquidity

The principal methodology used in this rating was Analytical Framework For Water And Sewer System Ratings published in August 1999. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are considered EU Qualified by Extension and therefore available for regulatory use in the EU. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Information sources used to prepare the rating are the following: parties involved in the ratings, parties not involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.

Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Josellyn Yousef
Analyst
Public Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

GEORDIE THOMPSON
Vice President - Senior Analyst
Public Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

MOODY'S DOWNGRADES TO Ba3 FROM Ba1 AND WITHDRAWS THE RATING ON HARRISBURG AUTHORITY'S (PA) $69.4 MILLION WATER REFUNDING BONDS, SERIES OF 2008
No Related Data.

 

© 2013 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

 


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