SAN FRANCISCO Dec 10 Moody's Investors Service
downgraded nearly $160 million of Fresno Wastewater Enterprise
debt by one notch to 'A1' on Monday, citing concerns that the
City of Fresno, California, could tap the sewer system for
"The sewer enterprise itself is financially very healthy,
but the City's general credit quality has weakened significantly
in recent years," Moody's said in a statement.
The weakening has increased the risk that California's
fifth-largest city could "increase borrowing from the sewer
enterprise and the risk of immediate debt service acceleration,
in the unlikely event that the city were to seek bankruptcy
protection," Moody's added.
The rating agency said the sewer enterprise has "ample cash
reserves" in a city-wide pool. It pointed out that "the City may
borrow funds from the sewer enterprise fund, potentially
weakening the enterprise's financial flexibility and available
Moody's said its downgrade affects approximately $159.8
million in outstanding sewer enterprise bonds.
In July, Moody's lowered its issuer rating on Fresno to 'A3'
from 'A2' because of the city's weak finances and uncertainty
about its budget.