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By clicking “I AGREE” [at the end of this document], you indicate that you understand and intend these terms and conditions to be the legal equivalent of a signed, written contract and equally binding, and that you accept such terms and conditions as a condition of viewing any and all Moody’s inform​ation that becomes accessible to you [after clicking “I AGREE”] (the “Information”).   References herein to “Moody’s” include Moody’s Corporation, Inc. and each of its subsidiaries and affiliates.

 

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2.            You acknowledge and agree that Moody’s credit ratings: (i) are current opinions of the future relative creditworthiness of securities and address no other risk; and (ii) are not statements of current or historical fact or recommendations to purchase, hold or sell particular securities.  Moody’s credit ratings and publications are not intended for retail investors, and it would be reckless and inappropriate for retail investors to use Moody’s credit ratings and publications when making an investment decision.  No warranty, express or implied, as the accuracy, timeliness, completeness, merchantability or fitness for any particular purpose of any Moody’s credit rating is given or made by Moody’s in any form whatsoever.          

 

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Rating Action:

MOODY'S: CITY OF SAN DIEGO'S SUBORDINATED WATER REVENUE REFUNDING BONDS RATED Aa3

27 Mar 2012

SENIOR LIEN BONDS' Aa2 RATING AFFIRMED

New York, March 27, 2012 -- Moody's Rating

Issue: Subordinated Water Revenue Bonds, Refunding Series 2012A; Rating: Aa3; Sale Amount: $212,000,000; Expected Sale Date: 4/3/12; Rating Description: Revenue: Government Enterprise

Opinion

Moody's Investors Service has assigned an Aa3 rating to the Subordinated Water Revenue Bonds, Refunding Series 2012A, of the City of San Diego's Water Enterprise. We have also affirmed the Aa2 rating on the utility's outstanding senior lien bonds and the Aa3 rating on the outstanding subordinate bonds. The outlook on both ratings is stable.

RATING RATIONALE

The rating is partly based on the system's significantly improved financial performance since 2004. However, projected slow growth in water sales in the next several years and no new rate increases until 2014 dampen projected revenue growth and lower debt service coverage ratios, which are quite low for the current rating level. However, the city has a history of outperforming its debt service coverage projections. If actual, combined senior and subordinate debt service coverage levels beyond 2013 are in fact at the projected levels of as low as 1.3x, the current rating would be under downward pressure. The fundamental strength of the enterprise remains a key credit factor, including its essentiality and its large, strong, and diverse service area, which provides a relatively high degree of revenue stability. The overall economic conditions in the service area have begun to show improvement in the last year or so, including growth in assessed values, transient occupancy tax and sales tax. The ratings also reflect the utility's favorable debt position, which is likely to remain manageable despite the expected addition of a of new debt during the next five years necessitated by the current Capital Improvement Program. The proceeds of the current issue, along with available reserve funds, will be used to refund all or some of the utility's outstanding subordinated revenue bonds.

STRENGTHS

--Large, highly diverse service area, now slowly expanding

--Strong financial oversight with conservative budgeting and projections

--Strong senior lien debt service coverage levels

--Strong unrestricted cash position

CHALLENGES:

--Below average debt service coverage levels for total debt

--Large capital Improvement Program

Outlook

The stable outlook for our rating on the water enterprise's debt reflects the stable financial operations of the utility and our expectation that the city will be able to implement its capital plan while preserving its financial strength. However, slow growth in revenues is projected to dampen debt service coverage ratios. The projections reflect no rate increase until 2014 and the resulting coverage levels are very low for the current rating level. If actual debt service coverage levels beyond 2013 are in fact at the projected levels, the current rating would be under downward pressure.

What Could Change the Rating--Up

--Significantly wider debt service coverage levels

--Significant improvement in the area economy

--Significant improvement In the utility's liquidity position

What Could Change the Rating--Down

--Debt service coverage levels well below recent levels

--Significant deterioration In the utility's liquidity position

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

Although this credit rating has been issued in a non-EU country which has not been recognized as endorsable at this date, this credit rating is deemed "EU qualified by extension" and may still be used by financial institutions for regulatory purposes until 30 April 2012. 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, confidential and proprietary Moody's Investors Service's information, and confidential and proprietary Moody's Analytics' information.

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

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

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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

Eric Hoffmann
Senior Vice President
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: CITY OF SAN DIEGO'S SUBORDINATED WATER REVENUE REFUNDING BONDS RATED Aa3
No Related Data.
© 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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