KBRA Affirms AA Rating with Stable Outlook for The Metropolitan Government of Nashville and Davidson County, TN Water and Sewer System WIFIA Loan
20 Jun 2023 | New York
KBRA affirms the long-term rating of AA with a Stable Outlook for the The Metropolitan Government of Nashville and Davidson County, TN Water and Sewer System’s WIFIA Loan for Process Advancements at Omohundro and K.R. Harrington Water Treatment Plants Project (WIFIA ID – N20115TN).
Key Credit Considerations
The rating was affirmed because of the following key credit considerations:
- Full rate setting autonomy and return to annual rate increases since 2019 demonstrates willingness to increase rates to meet operating and capital requirements.
- Trend of strong financial results and strong debt service coverage in the last five years accompanied by a trend of strengthening liquidity.
- Clean Water Nashville capital program mandated by consent decree is large but affordable in the context of long-dated compliance deadline.
- Substantial escalation in consent decree program costs have been identified in the last year and ongoing negotiation with respect to program timeline and scope signal potential for further material escalation.
- System leverage may increase over time given the size of consent decree projects.
- Substantial fulfillment of consent decree requirements accompanied by the maintenance of moderate or reduced leverage and affordable rates.
- Further large escalation of consent decree and other capital program costs to a level placing significant pressure on rate affordability.
- Inability to adjust rates as needed and on a timely basis to manage operating and capital needs while maintaining moderate leverage.
- Substantial erosion in operating performance resulting in large reduction in debt service coverage and liquidity.
To access rating and relevant documents, click here.