CHICAGO – A Wisconsin town won back its investment grade rating after renegotiating direct purchase contracts with its banks.
Standard & Poor's raised the town of Lawrence's general obligation rating to AA-minus from BB-plus and assigned a stable outlook to the credit on Dec. 14.
"The seven-notch upgrade reflects our view of the town's successful renegotiation of terms within its bank loan agreements, removing what we considered permissive events of default with immediate acceleration as a remedy," said Standard & Poor's analyst Michael Furla.
The town has $4.5 million in direct-purchase debt in four loans with two local banks.
The rating agency dropped the town's rating of AA in September by eight notches to a junk level over its concerns that Lawrence faced heightened risk in its liquidity profile as the loan terms could lead to an immediate acceleration of principal and interest.
"These permissive events of default and immediate acceleration as a remedy, if they were they to materialize, would have stressed the town's available liquidity," the rating agency warned.
Under the rating agency's local government GO criteria published on Sept. 12, 2013, if a contingent liability risk exceeds 25% of general fund revenues, the liquidity factor score is automatically lowered to very weak, which invokes a rating cap of BB-plus.
In September, Standard & Poor's also placed the rating on CreditWatch with developing implications and said the town could win an upgrade it successfully renegotiated the terms of the bank loan agreements, removing the terms that could trigger immediate acceleration of principal and interest.
Lawrence is a town of about 4,900 in Brown County about eight miles south of Green Bay.
