AFFIRMS RATINGS ON OUTSTANDING LEASE AND GO OBLIGATIONS
New York, September 26, 2011 -- Moody's Rating
Issue: 2011 General Obligation Refunding Bonds; Rating:
Aa2; Sale Amount: $400,000,000; Expected
Sale Date: 9/28/2011; Rating Description: General Obligation
Opinion
Moody's Investors Service has assigned a Aa2 rating to Los Angeles Unified
School District's $400 million 2011 General Obligation Refunding
Bonds. At this time we have also affirmed the Aa2 rating on the
district's outstanding general obligation bonds and the A1 and Aa3 ratings
on its various general fund-related lease financings. The
outlook on these ratings is stable.
SUMMARY RATING RATIONALE
The district's greatest challenge is addressing financial pressures stemming
largely from the state's own financial difficulties. These pressures
have thus far been no greater than those experienced by other urban districts
in the state, and the district has displayed considerable willingness
and ability to make deep, difficult budgetary adjustments to preserve
financial flexibility consistent with the current ratings. There
may also be pressures from the state budget which affect the district
disproportionately as the district is the recipient of a significant amount
of assistance not available to most districts in the state.
The district serves much of the city of Los Angeles and adjacent communities.
The size and diversity of the economic base serve as key credit strengths.
Despite the diversity of the employment base, the local unemployment
rate has climbed above the statewide rate which is significantly higher
than the national rate. Continued economic weakness will likely
undermine tax base growth in the near term.
The current rating action represents an affirmation of our existing Aa2
ratings on the district's general obligation bonds, the A1 rating
on the district's general fund, fixed asset abatable leases,
and the Aa3 rating on the district's fixed asset leases with diminished
likelihood of abatement.
STRENGTHS:
" Strong financial operations with improving reserves
" Generally conservative budgeting, a favorable history of mid-year
budget monitoring/adjustment, and established, sound financial
policies
" Exceptionally large, highly diverse economy and tax base
" All property taxes for G.O. bond debt service collected
by county and forwarded to the paying agent without district involvement
" Minimal exposure to variable rate debt
CHALLENGES:
" Below average resident socioeconomic profile
" Significant revenue raising constraints common to all California school
districts
" Above average and growing overall debt burden
OUTLOOK
The outlook for our ratings on LAUSD's long-term debt remains stable
at this point, as we expect the district will likely preserve financial
flexibility by making all necessary budget reductions to offset revenue
reductions from the state, and maintain a financial position consistent
with its highly rated, large district peers.
WHAT COULD MAKE THE RATING GO UP
- Significant improvement in the district's financial position
- Trend of significant growth in assessed valuation
- Substantial improvement in socioeconomic measures
WHAT COULD MAKE THE RATING GO DOWN
- Significant deterioration in the district's financial position
- Protracted decline in the district's assessed valuation
The principal methodology used in this rating was General Obligation Bonds
Issued by U.S. Local Governments published in October 2009.
Please see the Credit Policy page on www.moodys.com for
a copy of this methodology .
REGULATORY DISCLOSURES
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 credit rating are the following:
parties involved in the ratings, and public 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 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.
Kevork Khrimian
Vice President - Senior 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
Dari Barzel
VP - Senior Credit Officer
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 ASSIGNS Aa2 TO $400 MILLION OF LOS ANGELES USD'S 2011 GENERAL OBLIGATION REFUNDING BONDS