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Global Credit Research - 29 Oct 2010
$9.0 Million Debt Affected. NRUC Guaranty
New York, October 29, 2010 -- Moody's has assigned the rating of A2 to Central Wisconsin Electric Cooperative's
(CWEC) planned issuance of $9,000,000 Public Finance
Authority Fixed Rate Revenue Bonds, Series 2010A. The rating
outlook is stable.
The rating is based upon the guaranty provided by National Rural Utilities
Cooperative Finance Corporation (NRUC) whose senior unsecured rating is
The proceeds of the bonds will be used to finance various improvements
to CWEC's existing electric distribution system, the construction
of a new headquarters building, and related financing costs,
including the replacement and installation of overhead and underground
wires, control and other devices.
Principal and interest on the bonds will be paid by the trustee from monies
received from the issuer paid solely from loan payments to be made by
CWEC, and to the extent such monies are insufficient, from
funds obtained under the NRUC guarantee.
The NRUC guarantee will insure payment on the stated maturity dates,
in the case of principal, and stated payment dates for interest.
NRUC's A2 senior unsecured debt rating is based on its high quality
asset portfolio; its unique market position as the dominant lender
to electric distribution cooperatives; an excellent competitive position
that includes an ability to raise margins on member loans; a good
track record in managing credit restructurings; an improved risk
management program and a declining exposure to the more volatile telecommunications
sector. To that end, the rating acknowledges the continued
progress made by NRUC in working to resolve a large nonperforming loan
to a bankrupt Virgin Islands telecommunications company as the US Virgin
Islands operating companies were transferred to a NRUC wholly-owned
subsidiary earlier in October. The rating also takes into account
NRUC management's attempts in recent years to reduce the degree of single
obligor exposure within the loan portfolio; the company's continued
but reducing reliance on capital markets to fund its lending business,
and continuing high leverage.
The stable rating outlook incorporates our view that modest loan growth
among rural electric cooperatives will help maintain strong asset quality
within the loan portfolio. To that end, the stable outlook
factors in our belief that the telecom portfolio, a source of loan
portfolio weakness, will continue to represent less than 10%
of the total loan portfolio. The stable outlook also considers
NRUC's plans to gradually lower leverage, and an expectation that
NRUC will maintain sufficient liquidity as well as access to private sources
of funding to mitigate the firm's reliance on wholesale funding.
In light of the relatively high leverage and the firm's exposure to potential
impairments from certain foreclosed assets, the prospect of a higher
rating is limited within the next twelve months.
The rating could be downgraded if a new meaningful problem loan surfaced
within NRUC's portfolio, if recently implemented capital raising
and capital retention efforts do not reduce NRUC's leverage over the next
twelve to eighteen months, if NRUC fails to maintain an adequate
liquidity profile including ample access to multi-year bank credit
facilities, or if the lending strategy began to deemphasize the
core electric cooperative market.
For more information on NRUC, please refer to the press release
dated October 20, 2010 and the most recent Credit Opinion which
can both can be found on moodys.com under the issuer's name.
The principal methodologies used in rating NRUC are Analyzing the Credit
Risks of Finance Companies published in October 2000, and U.S.
Electric Generation & Transmission Cooperatives published in December
2009. Other methodologies and factors that may have been considered
in the process of rating these issuers can also be found in the Rating
Methodologies sub-directory on Moody's website.
Based in Herndon, Virginia, NRUC is a private, not for
profit cooperative association exclusively serving rural electric,
service, and telecommunication utilities. The principal purpose
of NRUC is to provide its members with a source of financing to supplement
the loan programs of the Rural Utilities Service of the US Department
of Agriculture. At August 31, 2010, NRUC had total
assets of approximately $20.15 billion, of which loans
to members represented about $19.29 billion. At August
31, 2010, approximately 90% of NRUC's total loan portfolio
was with rural electric cooperatives.
..Issuer: Public Finance Authority
....Senior Unsecured Revenue Bonds,
Central Wisconsin Electric Cooperative is a rural electric distribution
cooperative, serving approximately 7,700 members/owners on
1,400 miles of electric lines in parts of four central-Wisconsin
Information sources used to prepare the credit 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, confidential and proprietary Moody's
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of assigning
a credit rating.
MOODY'S adopts all necessary measures so that the information it uses
in assigning a credit 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 ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service 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 the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
Senior Vice President
Infrastructure Finance Group
Moody's Investors Service
William L. Hess
MD - Utilities
Infrastructure Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's assigns A2 to Central Wisconsin Electric Cooperative Public Finance Authority Fixed Rate Revenue Bonds, Series 2010A
250 Greenwich Street
New York, NY 10007
No Related Data.
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