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Rating Action:

Moody's assigns Aa3 to Naugatuck CT's $12.3M Incinerator COPs and $1.6M Wastewater COPs

Global Credit Research - 16 Apr 2014

New York, April 16, 2014 --

Moody's Rating

Issue: Certificates of Participation (Naugatuck Wastewater System Project) 2014 Series A; Rating: Aa3; Sale Amount: $1,600,000; Expected Sale Date: 04-24-2014; Rating Description: Lease Rental: Appropriation

Issue: Certificates of Participation (Naugatuck Incineration Facilities Project) 2014 Series A (Tax Exempt) (AMT); Rating: Aa3; Sale Amount: $12,000,000; Expected Sale Date: 04-24-2014; Rating Description: Lease Rental: Appropriation

Issue: Certificates of Participation (Naugatuck Incineration Facilities Project) 2014 Series B (Taxable); Rating: Aa3; Sale Amount: $300,000; Expected Sale Date: 04-24-2014; Rating Description: Lease Rental: Appropriation

Opinion

Moody's Investors Service has assigned a Aa3 rating to the Borough of Naugatuck's (CT) 2014 Certificates of Participation (COPs). The current issuance consists of the following three series: $12 million Series 2014A Tax-Exempt AMT (Incinerator); $300,000 Series 2014B Taxable (Incinerator); and $1.6 million Series 2014A Tax-Exempt (Wastewater). The COPs are secured by lease payments to be made by the borough to the trustee according to respective lease agreements between the borough and respective statutory trusts, subject to annual appropriation. Proceeds of the 2014 COPs will be used to refund the Series 2002 COPs for interest savings in excess of 11% of refunded principal, with no extension of maturities. The 2002 COPs were originally issued for the purpose of financing capital improvements to the borough's wastewater and incinerator facilities to comply with consent orders.

Concurrently, Moody's has affirmed the Aa2 rating on the borough's $63.8 million of outstanding general obligation debt, and the Aa3 rating on $15.4 million of outstanding COPs we deem essential.

SUMMARY RATING RATIONALE

The Aa3 rating reflects satisfactory legal provisions, appropriation risk and the essential nature of the projects originally financed, as well as fundamental characteristics of the borough's general obligation rating.

The Aa2 long-term general obligation rating reflects the borough's healthy financial position, modest tax base with average wealth levels, and high debt burden.

STRENGTHS

- Satisfactory reserves

- Stabilizing tax base with potential for new development

CHALLENGES

- High debt burden

- Increasing fixed costs for pension, healthcare and debt service

WHAT COULD MAKE THE RATING GO UP

- Robust fund balance growth

- Significant tax base growth and improvement in demographic profile

- Material reduction in the debt burden

WHAT COULD MAKE THE RATING GO DOWN

- Increase in the debt burden

- Reduction in General Fund balance or liquidity

- Deterioration of tax base and demographic profile

The principal methodology used in the certificates of participation rating was The Fundamentals of Credit Analysis for Lease-Backed Municipal Obligations published in December 2011. The principal methodology used in the general obligation rating was US Local Government General Obligation Debt published in January 2014. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

REGULATORY DISCLOSURES

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 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 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 the rating.

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

Heather Guss
Associate Analyst
Public Finance Group
Moody's Investors Service, Inc.
60 State Street
Suite 700
Boston, MA 02109
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Thomas Bradford Compton
Analyst
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 Aa3 to Naugatuck CT's $12.3M Incinerator COPs and $1.6M Wastewater COPs
No Related Data.
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