MOODY'S DOWNGRADES CITY OF WESTLAND'S (MI) WATER AND SEWER SYSTEM REVENUE BONDS TO Ba1 FROM A3

Posted on: December 28, 2009, 5:20 pm

NEW YORK, Dec 28, 2009 -- Moody's Investors Service has downgraded to Ba1 from A3 the City of Westland's (MI) water and sewer system revenue debt, affecting $3.9 million of outstanding debt. The bonds are secured by the senior lien of on the system's net water and sewer revenues, and the legal covenants include the maintenance of rates sufficient to generate annual net revenues that equal at least 1.0 times annual debt service. The downgrade primarily reflects the district's significantly weakened financial position, including the failure to generate revenues sufficient to pay debt service in four of the past five years, the deterioration of reserves, and the use of reserves to make debt service payments. The primary drivers for downgrading the rating below investment grade were the inability of the city to express a coherent plan to increase net revenues to meet future debt service obligations, which are expected to increase in 2011. The rating also incorporates the system's modest debt ratio, mid-sized customer base with average wealth levels, and the lack of available reserves relative to debt service. Additionally, the rating reflects Moody's expectation that the city will eventually implement the rate increases necessary to comply with the legal covenants for its water and sewer revenue bonds...

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