Bond Outlook 'Positive' for SAWS In 2007: Fitch Revises Outlook on Improved Liquidity, Rate Stability
Source: San Antonio Water System
According to Fitch analysts, the Positive Outlook reflects “improved liquidity and coverage levels, achieved with smaller than projected rate increases, and the capital plan's increased cash-funded component.” The agency also noted that continued strong coverage, along with further progress on SAWS' large water supply projects, may lead to further positive credit consideration in the future.
"We are extremely pleased by this change in outlook by Fitch because it reflects the bond community's increasing confidence in SAWS management," noted Doug Evanson, SAWS vice president and chief financial officer. "Of course, our ultimate goal is an upgrade in all of our bond ratings, which would result in millions of dollars in savings for SAWS ratepayers. We will continue to work diligently toward that goal in the year ahead."
Along with the upgraded outlook, Fitch has assigned an A+ rating to SAWS' $8.1 million water system junior lien revenue and refunding bonds, series 2007, and $35.4 million water system junior lien revenue and refunding bonds, series 2007A. Fitch cited SAWS' financial strength, competitive rates, and steady service area expansion in assigning the A+ rating. Also considered in the rating is SAWS' substantial capital improvement plan, including its commitment to long-term water supply projects designed to reduce dependence on the Edwards Aquifer.
These new issues are scheduled to be placed with the Texas Water Development Board in January, with proceeds used to fund wastewater and recycle water capital improvement projects and refund a portion of the utility's outstanding commercial paper, plus issuance costs.
Fitch also affirmed its ratings on SAWS' currently outstanding bonds, including AA- on $813.4 million senior lien bonds; A+ on $214.1 million junior lien bonds; and A on $118.4 million subordinate lien bonds. The agency has not yet released its rating for SAWS' upcoming issue of approximately $365 million of revenue refunding bonds, but is expected to do so in January.
At Moody's Investors Service, analysts cited SAWS' large, diverse, and growing service area as well as sound water supply and capital planning as reasons for its high quality ratings of the utility. Historically well-maintained financial operations and debt service coverage ratio were also mentioned as positive factors.
Moody's assigned Aa3 rating to SAWS' approximately $365 million of revenue refunding bonds, series 2007 and A1 rating to junior lien revenue and refunding bonds, series 2007 and series 2007A. Moody's also affirmed its Aa3 rating on SAWS' currently outstanding senior lien bonds and the A1 rating on junior lien bonds.
According to Standard & Poor's analysts, sound financial performance, competitive rates and positive water supply strategies were major contributing factors to its strong bond ratings for SAWS.
Standard & Poor's Ratings Services assigned its AA- standard long-term rating to series 2007 water system revenue refunding bonds and its standard long-term A+ rating to the utility's series 2007 and 2007A junior-lien water system revenue and refunding bonds. The outlook for all three new issues was rated as stable.
Standard & Poor's also affirmed its AA- standard long-term rating and Standard & Poor's underlying rating (SPUR), with a stable outlook, and A+ standard long-term rating and SPUR, with a stable outlook, on currently outstanding senior lien and junior lien bonds, respectively.