LOS ANGELES — Moody's Investors Service upgraded to Aa1 from Aa2 the Las Vegas Valley Water District's general obligation limited tax debt ahead of plans to price $430 million in water refunding bonds on May 13.
The rating upgrade is predicated upon the improving credit strength of the Southern Nevada Water Authority, whose net revenues secure a substantial portion of the authority's outstanding GOLT debt, according to the April 22 Moody's report.
The upgrade also reflects the near-term expected completion of a major capital project that will increase the security of the region's water supply, Moody's analysts wrote in the report.
The bonds will be sold in three series of $185 million, $200 million and $45 million. They are secured by the authority's pledged revenues.
The upgrade impacts $1.7 billion of outstanding LVVWD GOLT debt. The outlook is stable.
The rating reflects the water district's very large service area, an enormous tax base and local economy that is in recovery, and a manageable debt burden, according to analysts.
"Finally, the rating takes into consideration the LVVWD's satisfactory and recently improved operating position supported by management's actions to increase rates and also reduce capital and operating expenses since the recent downturn," analysts said.
Debt service coverage for GOLT bonds supported by the LVVWD's net revenues remains below average compared to some other large, highly-rated water systems, and double-barreled debt supported by the SNWA remains self-supported by its resources, according to the report.
"The stable outlook on the LVVWD reflects our expectation that the economic and housing recoveries will lead to stability for the service area. We also expect the LVVWD will adopt prudent rate increases and other adjustments as needed to maintain a satisfactory operating position and sufficient debt service coverage," according to the report. "Importantly, we also anticipate that management will continue to actively monitor drought conditions for its principal water supply, the federally managed Colorado River, and implement operating adjustments as needed over the medium term to ensure sufficient water remains available for use."
