New York, December 07, 2012 --
Issue: Utility System Junior Lien Revenue and Refunding Bonds, Series 2012; Rating: A1; Sale Amount: $154,895,000; Expected Sale Date: 12-18-2012; Rating Description: Revenue: Government Enterprise
Issue: Utility System Junior Lien Revenue Bonds, Series 2012; Rating: A1; Sale Amount: $68,565,000; Expected Sale Date: 12-18-2012; Rating Description: Revenue: Government Enterprise
Moody's Investors Service has assigned an initial A1 rating to the City of Corpus Christi's (TX) $154.9 million Utility System Junior Lien Revenue and Refunding Bonds, Series 2012 and $68.6 million Utility System Junior Lien Revenue Bonds, Series 2012 . Concurrently, Moody's has affirmed the Aa3 rating on the system's $383.7 million of outstanding prior lien debt that will remain post refunding.
SUMMARY RATING RATIONALE
The bonds are secured by a second lien on the net revenues of the system and while outstanding debt is secured by a prior lien on the net revenues of the system. The ratings reflect a stable and growing service area, large financial operations supporting adequate debt service coverage, and plans for debt that will require future rate increases to maintain historical coverage. The ratings also incorporates somewhat weaker net working capital and days of cash on hand given that the system uses excess cash to fund one time capital needs. However, the management team is strong which is demonstrated in long term financial forecasts and a ten year capital improvement plan (CIP). The Aa3 rating on the prior lien reflects the first lien of system net revenues while the A1 rating on the junior lien reflects the second lien on system net revenues and corresponding satisfactory legal provisions.
-Consistent and stable system growth
-Trend of satisfactory debt service coverage
-Long term planning for both financial operations and debt requirements
-Ongoing debt needs associated with large Sanitary Sewer Overflow program
-Council approval on rate increases will be necessary to support future debt
-Modest net working capital compared to other highly rated systems
WHAT COULD MAKE THE RATING GO UP
Improvement in liquidity of the system
Strengthened debt service coverage
WHAT COULD MAKE THE RATING GO DOWN
Use of reserves weakening the liquidity of the system
Trend of narrow debt service coverage
The principal methodology used in this rating was Analytical Framework For Water And Sewer System Ratings published in August 1999. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.
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Kristin Button Vice President - Senior Analyst Public Finance Group Moody'sInvestors Service, Inc.600 North Pearl Street Suite 2165 Dallas, TX 75201 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653Edward Damutz VP - Senior Credit Officer Public Finance Group JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Releasing Office: Moody's Investors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.
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