DALLAS — As expected, Standard & Poor's upgraded Utah Transit Authority's subordinate-lien sales-tax revenue bonds to A-plus after a record January refunding improved the transit system's debt-coverage ratios.
The rating had been under a positive outlook until new indenture language was completed. With the upgrade, the outlook reverts to stable.
"The stable outlook on the subordinate-lien bonds reflects our expectation of continued good maximum annual debt service coverage within the next two years, based on the rise in pledged revenue in 2013 and the absence of the authority's additional new-money bonding plans in the short term," S&P analyst Jennifer Hansen wrote in the April 17 upgrade report. "We do not expect to take a positive rating action during the two-year outlook horizon."
UTA's $860.6 million refunding on Jan. 26 improved the additional bonds test on the outstanding bonds to a ratio of 1.2 times from 1.1 times, Hansen wrote.
"The only adequate 1.20x subordinate-lien ABT could remain a limiting rating factor even if debt service coverage improves, despite the authority's lack of immediate plans to issue new debt," the S&P report added.
In the January refunding - the largest in UTA's history — the authority achieved net present value savings of $77.7 million or 8.8%. That was better than expected, even during a period of historically low rates, according to Robert Biles, UTA chief financial officer.
Moody's Investors Service rates UTA's subordinate-lien bonds A1, while conferring Aa2 ratings on the senior debt. The authority has about $2 billion of outstanding senior and subordinate-lien debt.
Standard & Poor's rates the senior-lien refunding bonds AAA with a stable outlook. A first lien on the authority's gross sales tax revenues secures the senior-lien bonds.
