KBRA Assigns AA Rating, Stable Outlook to State of Louisiana General Obligation Refunding Bonds Series 2024-C, 2024-D, 2024-E and 2025-A (Forward Delivery); Affirms Rating for Parity Bonds
1 Aug 2024 | New York
KBRA assigns a long-term rating of AA with a Stable Outlook to the State of Louisiana General Obligation Refunding Bonds, Series 2024-C, Series 2024-D, Series 2024-E, and Series 2025-A (Forward Delivery). Concurrently, KBRA affirms the AA long-term rating and Stable Outlook on parity General Obligation bonds outstanding.
The Stable Outlook reflects Louisiana’s diversifying economic base, strong and improving reserve position, and effective financial management practices. The state’s conservative budgeting and prudent management of accumulated reserve balances will remain in focus in an environment of waning Federal pandemic aid, and while continuing to acknowledge Louisiana's economic vulnerability to climatic events, including hurricanes and coastal erosion.
Key Credit Considerations
The rating actions reflect the following key credit considerations:
Credit Positives
- Constitutional balanced budget requirement, coupled with statutory limitations on fund balance utilization for operations.
- Improving reserve and liquidity position, supported by revenues that proved resilient throughout the COVID-19 pandemic.
- Moderate leverage metrics, coupled with a formidable legal framework prioritizing debt repayment.
Credit Challenges
- Comparatively weak socioeconomic metrics relative to other U.S. States.
- Some exposure to commodity pricing volatility, given the employment and economic output concentration in chemical and petroleum production.
- Louisiana’s economy is exposed to volatility related to climate events, including hurricanes and coastal erosion.
Rating Sensitivities
For Upgrade
- Improvement in the state's socioeconomic metrics, notably personal incomes, could lead to upward rating migration over time.
- Improved pension funding status across the State’s seven funds.
For Downgrade
- A weakening of budgetary performance, reserves, or direct liquidity.
- The reversal of financial measures enacted to enhance budgetary stability.
To access rating and relevant documents, click here.