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Rating Action:

Moody's assigns A3 rating to Pittsburgh Water & Sewer Authority, PA's $94.375 million Water & Sewer System First Lien Revenue Bonds, Series A&B of 2020; outlook stable

05 Nov 2020

Approximate $624 million of parity debt outstanding

New York, November 05, 2020 -- Moody's Investors Service has assigned an A3 rating to Pittsburgh Water & Sewer Authority, PA's $1.015 million Water and Sewer System First Lien Revenue Bonds, Series A of 2020 (Federally Taxable) and $93.36 million Water and Sewer System First Lien Revenue Bonds, Series B of 2020. Moody's also maintains its A3 rating for the Authority's $218.805 million Water and Sewer System First Lien Revenue Bonds Series C of 2017, which will be remarketed December 1, 2020. Concurrently, we maintain the A3 rating on roughly $406 million of additional parity first lien revenue debt outstanding. The outlook is stable.

RATINGS RATIONALE

The A3 rating reflects Pittsburgh Water & Sewer Authority, PA's (PWSA) considerable size and dynamic, urban service area, and also considers its relatively narrow, though improving, cash position compared to similarly sized peers. The A3 rating also speaks to PWSA's strong current management controls, including comprehensive budgeting and planning, evidenced by two years of operating performance that exceeded budget expectations. The Pennsylvania Public Utility Commission continues to provide strong governance, which we believe will continue to help upgrade and standardize operations and controls at the Authority over the longer term. The A3 rating also reflects the Authority's major capital improvement plan, which will add materially to its debt burden over the next five years.

The A3 rating also incorporates our current understanding of the coronavirus pandemic's impact on PWSA's finances and operations. Favorably, customer account collections are reportedly down just modestly in 2020 compared to the prior year, and the Authority continues to project a solid liquidity position at year end. If our view of the credit quality of PWSA changes, we will update the rating and/or outlook at that time.

RATING OUTLOOK

The stable outlook reflects the authority's improved financial position as well as the credit-positive impact of PUC oversight and the strength of PWSA's management team, which we believe will serve to keep the Authority's finances and operations stable in the near term.

FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS

- Substantial improvement in liquidity that is maintained over several reporting periods

- Meaningful reduction of debt

- Sustained improvements in debt service coverage

FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS

- Material narrowing of debt service coverage and liquidity position

- Inability to raise rates sufficiently to meet debt service coverage covenants while also funding significant deferred capital improvements

- Failure to effectively deploy new revenues to address near term infrastructure and operating needs

- Substantial new or worsening long-term environmental concerns

LEGAL SECURITY

The authority's first lien revenue bonds are limited obligations of the authority, secured by pledged water and sewer system revenues.

USE OF PROCEEDS

The Series 2017 C bonds will be remarketed on December 1, 2020 and will bear interest at the SIFMA Index Rate. The bonds will be subject to mandatory tender for purchase on December 1, 2023.

Proceeds from the Series A of 2020 bonds will be used to pay the costs of the Series 2017 C remarketing.

Proceeds from the Series B of 2020 bonds will be used to pay down the principal outstanding on a capital line of credit.

PROFILE

PWSA is an authority of the City of Pittsburgh (A1 stable), providing water treatment and conveyance to 84% of the city's population of roughly 305,000 residents and sewer conveyance for the entire city.

METHODOLOGY

The principal methodology used in these ratings was US Municipal Utility Revenue Debt published in October 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBM_1095545. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security 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.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.

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.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Nicolanne Serrano
Lead Analyst
Regional PFG Northeast
Moody's Investors Service, Inc.
7 World Trade Center
250 Greenwich Street
New York 10007
US
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Michael Wertz
Additional Contact
Regional PFG Northeast
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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