MOODY'S ASSIGNS A1 ENHANCED WITH A NEGATIVE OUTLOOK AND Baa1 UNDERLYING RATING WITH A NEGATIVE OUTLOOK TO BETHLEHEM AREA SCHOOL DISTRICT (PA) $29.6 MILLION GENERAL OBLIGATION (REFUNDING) BONDS, SERIES OF 2010

Posted on: December 14, 2009, 12:38 pm

NEW YORK, Dec 14, 2009 -- Moody's Investors Service has assigned a Baa1 underlying and an A1 enhanced rating to the Bethlehem Area School District's $29.6 million General Obligation Bonds (refunding), Series of 2010; the outlook on both ratings is negative. Concurrently, Moody's has affirmed the Baa1 underlying rating on approximately $302.6 million in previously issued general obligation unlimited tax debt, as it is exempt from Special Session Act 1 property tax limitations. The refunding series 2010 bonds are secured by the district's general obligation unlimited tax pledge, and proceeds will currently refund a portion of the outstanding General Obligation Bonds, Series of 2005 and will partially fund swap termination payment for an approximate net present value loss of $1 million. The current rating reflects the district's distressed financial position marked by five consecutive, significant operating deficits resulting in an estimated accumulated $423,000 General Fund deficit at fiscal year-end 2009 (ended June 30). The rating heavily factors Moody's expectation that the recent receipt of a one-time $3 million swap termination payment coupled with $2.5 million of expenditure cuts will help eliminate the deficit by the end of the current fiscal year 2010. The rating also incorporates the district's large tax base with average wealth levels, high debt burden with no near-term borrowing plans, and above average, but recently reduced variable rate and swap exposure...

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