KBRA Affirms A+ for the Sewerage and Water Board of New Orleans WIFIA Loan for the Sewer and Water Line Rehabilitation, Repair and Replacement Program; Stable Outlook
24 Oct 2024 | New York
KBRA affirms the long-term rating of A+ for the Sewerage and Water Board of New Orleans (SWBNO) WIFIA Loan for the Sewer and Water Line Rehabilitation, Repair, and Replacement Program. The Outlook is Stable.
The rating affirmation reflects the sewer system's autonomous rate-setting authority, solid financial performance, and strong legal provisions supporting the sewer system debt. Offsetting these strengths is the large capital plan needed to comply with mandated environmental and aged-infrastructure improvements, and rate affordability concerns given the service area’s high poverty level and population decline in recent years.
Key Credit Considerations
The rating was affirmed because of the following key credit considerations:
Credit Positives
- Providing an essential utility service with local rate-setting authority.
- Sewer system’s historically solid financial performance.
- Strong legal provisions for the WIFIA Loan, including a rate covenant of 1.25x and fully funded DSRF.
Credit Challenges
- Major sewer capital plan to fund mandated and aging infrastructure updates.
- Moderated rate flexibility given the service area’s somewhat weaker demographic profile.
Rating Sensitivities
For Upgrade:
- Successful implementation of capital projects on-time and within budget, supported by timely rate increases, resulting in stronger than projected DSC.
For Downgrade:
- Service area affordability challenges that compromise the Board’s ability to raise rates.
- Material delay or inadequate replacement of sewer system improvements which increase future capex and debt requirements, and pressures financial coverage below the projected level.
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