New York, April 26, 2016 -- Issue: General Obligation Corporate Purpose Bonds, Series 2016 B3; Rating: Aa3; Rating Type: Underlying LT; Sale Amount: $38,020,000; Expected Sale Date: 05/05/2016; Rating Description: General Obligation;
Issue: General Obligation Promissory Notes, Series 2016 N2; Rating: Aa3; Rating Type: Underlying LT; Sale Amount: $127,740,000; Expected Sale Date: 05/05/2016; Rating Description: General Obligation;
Issue: Taxable General Obligation Corporate Purpose Bonds, Series 2016 T4; Rating: Aa3; Rating Type: Underlying LT; Sale Amount: $27,530,000; Expected Sale Date: 05/05/2016; Rating Description: General Obligation;
Issue: Revenue Anticipation Notes, Series 2016 R1; Rating: MIG 1; Rating Type: Underlying ST; Sale Amount: $90,000,000; Expected Sale Date: 05/05/2016; Rating Description: Note: Tax and/or Revenue Anticipation;
Summary Rating Rationale
Moody's Investors Service has assigned a Aa3 rating to the City of Milwaukee, WI's $127.7 million General Obligation (GO) Promissory Notes, Series 2016 N2, $38.0 million GO Corporate Purpose Bonds, Series 2016 B3, and $27.5 million Taxable GO Corporate Purpose Bonds, Series 2016 T4. We have also assigned a MIG 1 rating to the city's $90 million Revenue Anticipation Notes (RANs), Series 2016 R1. We also maintain the Aa3 rating on the city's previously issued GO debt. Post sale, Milwaukee will have $800 million of GO debt outstanding.
The Aa3 GO rating reflects the city's role as an economic engine for the State of Wisconsin (Aa2 positive); satisfactory General Fund reserves; alternate liquidity available for GO debt service in the Public Debt Amortization Fund (PDAF); and interest rate and refinancing risks associated with the city's debt profile. The MIG 1 rating on the Series 2016 R1 notes reflects the GO credit characteristics; historical timeliness and predictability of pledged revenues; reasonable cash flow projections; satisfactory timing between segregation of take-out financing and maturity; and favorable market access.
The stable outlook reflects our expectation that the city's tax base valuation trends will stabilize over the long term and that satisfactory reserve levels will be maintained. The outlook also reflects our expectation that the city will continue to closely manage its complex debt program.
Factors that Could Lead to an Upgrade
Improved demographic profile and a sustained reversal of declining valuation trends
Significant growth in General Fund reserves coupled with maintenance of PDAF liquidity
Moderation of debt burden
Factors that Could Lead to a Downgrade
Further declines in tax base valuation, resident income levels, or resident employment rates
Reduction in reserves in the General Fund, PDAF, or other city funds
Failure to adhere to internal debt management policies and procedures
Debt service on the Series 2016 N2 notes, Series 2016 B3 bonds, and Series 2016 T4 bonds is secured by the city's GO pledge, which benefits from a dedicated property tax levy that is not limited by rate or amount.
Debt service on the Series 2016 R1 notes is secured by the city's pledge of state aid payments expected to be received on the third Tuesday of November (November 21, 2016).
Use of Proceeds
Proceeds of the Series 2016 N2 notes, Series 2016 B3 bonds, and Series 2016 T4 bonds will finance various public improvements as well as provide the long-term financing for $52.5 million of outstanding commercial paper and $23 million of its line of credit in addition to refunding, for estimated interest savings, the 2017 through 2023 maturities of the city's Series 2006 B2 bonds. Proceeds of the Series 2016 R1 notes will provide cash flow support for the city in anticipation of the receipt of a state shared revenue payment on November 21, 2016.
Milwaukee is the largest city in Wisconsin. The 2014 population was estimated at 595,993.
The principal methodology used in the long-term ratings was US Local Government General Obligation Debt published in January 2014. The principal methodology used in the short-term rating was Short-Term Cash Flow Notes published in April 2013. Please see the Ratings Methodologies page on www.moodys.com for a copy of these methodologies.
For ratings issued on a program, series or category/class of debt, this announcement provides certain 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 certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain 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.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.
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
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Regional PFG Chicago
Moody's Investors Service, Inc.
100 N Riverside Plaza
Regional PFG Chicago
Moody's Assigns MIG 1 to Milwaukee WI's $90M RANS, Ser 2016R1; Aa3 to $193M GO Notes/Bonds Ser 2016N2 B3 & T4
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007