TEXT-Fitch rates NYC Muni Water Finance Authority bonds 'AA+'
Feb 14 - Fitch Ratings assigns an 'AA+' rating to bank bonds corresponding to the following series of water and sewer system (the system) second general resolution (SGR) revenue bonds for New York City Municipal Water Finance Authority (NYW) in the event of a future conversion to bank bonds: --$100,000,000 adjustable rate fiscal 2008 series B, subseries B-1A bonds; --$100,000,000 adjustable rate fiscal 2008 series B, subseries B-1B bonds; --$135,000,000 adjustable rate fiscal 2008 series B, subseries B-3 bonds. The Rating Outlook is Stable. The rating is being assigned in connection with the following: -- the execution of a standby letter of credit and reimbursement agreement provided by The Bank of Sumitomo Mitsui Banking Corporation, acting through its New York Branchdated March 1, 2013 and applicable to the fiscal 2008 series B, subseries B-1A bonds; -- the execution of a standby bond purchase agreement (SBPA) provided by the Royal Bank of Canada dated March 1, 2013 and applicable to the fiscal 2008 series B, subseries B-1B bonds; -- the extension of an SBPA currently provided by Bank of America, N.A. applicable to the fiscal 2008 series B, subseries B-3 bonds. The Rating Outlook is Stable. SECURITY The SGR bonds are special obligations of NYW, payable solely from and secured by a subordinate lien on gross revenues of NYW. FGR bonds are secured by a first lien on gross revenues of NYW. KEY RATING DRIVERS SOUND LEGAL PROTECTIONS: NYW's primary credit strength is its legal structure, including its status as a bankruptcy-remote issuer, providing substantial protection to bondholders from potential operating risks associated with the system and New York City. REGIONAL PROVIDER OF AN ESSENTIAL SERVICE: The combined system provides an essential service to an exceptionally large and diverse service area and benefits from an abundant, high-quality water supply exempt from expensive filtration requirements and transmission costs. INDEPENDENT RATE-SETTING AUTHORITY: Strong financial management and a proven ability and willingness to independently raise rates are reflected in consistently solid financial results, despite the continued volatility in consumption. WELL-MANAGED CAPITAL PROGRAM: Sophisticated capital planning efforts have helped achieve compliance with large and costly mandated regulatory projects and ensured the successful implementation of the large capital improvement plan. HIGHLY LEVERAGED SYSTEM: Leverage is high as a result of having to comply with environmental mandates and maintain a large urban system and its aging assets. Declining but still sizeable debt plans programmed into the current capital plan will keep debt levels elevated for the long term. IMPROVED COLLECTIONS: Below-average collection rates persist, although payment incentives and strong enforcement mechanisms have yielded positive results in recent years. RATING SENSITIVITIES MAINTENANCE OF SUFFICIENT RATES: Failure to achieve rate hikes sufficient to ensure adequate financial margins and maintain current debt service coverage levels on senior and subordinate lien obligations would be viewed negatively. DEBT LEVELS EXCEEDING PROJECTIONS: Escalation of debt levels beyond what is currently included in the five-year financial forecast would place added pressure on the system's debt profile. Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings. In addition to the sources of information identified in Fitch's U.S. Municipal Revenue-Supported Rating Criteria, this action was additionally informed by information from Creditscope. Applicable Criteria and Related Research: --'Revenue-Supported Rating Criteria' (June 12, 2012); --'U.S. Water and Sewer Revenue Bond Rating Criteria' (Aug. 3, 2012); --'2013 Water and Sewer Medians' (Dec. 5, 2012); --'2013 Sector Outlook: Water and Sewer' (Dec. 8, 2011). Applicable Criteria and Related Research: Revenue-Supported Rating Criteria U.S. Water and Sewer Revenue Bond Rating Criteria 2013 Water and Sewer Medians
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