Markets were flat on Friday morning, as investors digested conflicting financial news throughout the week.
Existing home sales were released on Monday morning, showing a drop of 4.9% and marking the lowest figure in nine months. On Friday morning, investors were faced with bad macro news, as the revised GDP growth rate for the fourth quarter came in at 2.2%, which is down from the initial estimate of 2.6%, and far below the third quarter’s growth of 5%. In some positive macro news this week, the University of Michigan’s Consumer Confidence Index for February was released on Friday morning, coming in at 95.4, versus the expected 94. Janet Yellen’s report to Congress on Tuesday did little to move markets up or down, as she said that the decision to raise interest rates will be considered on a month-to-month basis. As earnings season continues to wind down, Home Depot, Target, Kohl’s, and TJX Stores all reported estimate-beating results, while Comcast, Bank of Montreal and HSBC posted disappointing results. In the bond markets, 10-Year Treasury Yields dipped to 1.96 in the middle of the week, before closing out Thursday at 2.03. Below, we look at all of Moody’s municipal bond upgrades and downgrades from the past week.
- Queen Creek USD No. 95 (Maricopa Co.), AZ: Moody’s upgraded this school district to Aa3 from A1. The upgrade to Aa3 reflects the district’s maintenance of healthy levels of available reserves in recent years despite material economic and revenue pressures; moderately-sized tax base currently exhibiting robust growth in addition to having favorable long-term growth prospects; and manageable debt and pension liabilities, and no liability for other-post employment benefits (OPEB). The GO rating also reflects the strength of the lockbox collection and payment process for the debt service levy.
- Cameron County, TX: Moody’s upgraded this county to Aa3. The rating upgrade reflects the trend of positive operating performance and conscious building of reserves following several years of structural imbalance, expenditure pressures, and weak reserves. The Aa3 rating also reflects the county’s sizeable tax base located in far south Texas, weak socioeconomic profile, as well as manageable debt and pension burdens.
- Clovis (City of), CA: Moody’s upgraded this city to A1 from A2. The upgrade reflects the system’s characteristics, in particular the ample treatment capacity, exceptionally healthy liquidity position, strong rate management and legal provisions. These positive credit factors are more pronounced when assessed with the updated methodology. The A1 rating incorporates the system’s growing service area supported by a recovering economy, above average wealth indices and below-average debt service coverage.
- Morgan County School District, UT: Moody’s upgraded this county to A1 from A2. The upgrade to A1 from A2 reflects an improved financial profile that includes satisfactory available reserves. The rating also takes into consideration a moderately-sized and growing tax base, strong socioeconomic measures, and manageable debt and pension liabilities.
- Summerville, SC: Moody’s upgraded this city to Aa1 from Aa2. The Aa1 rating reflects the town’s strong financial performance, prudent financial management and resulting continued growth in the town’s large general fund reserves. The rating also reflects the city’s steadily growing tax base that benefits from proximity to Charleston, SC (GO rated Aaa), as well as strong job growth to maintain future population gains. The rating is indicative of the modest debt burden, with plans to issue future debt secured by growing franchise and hospitality fees.
- Milcrofton UD, TN: Moody’s upgraded this utility district to Aa2 from A1. The upgrade to Aa2 rating reflects the strong local economy and growing service area, solid financial position with strong coverage and ample liquidity, average debt ratio, and satisfactory legal provisions for bondholders.
- Falls Township, PA: Moody’s upgraded this township to Aa2 from Aa3. The upgrade reflects the township’s maintenance of increased reserve levels driven by conservative revenue budgeting, and large and ongoing annual host community fees paid to the township by a landfill operator. The Aa2 rating also incorporates the township’s sizeable tax base, above average resident wealth levels, and low debt and pension burdens.
- Seacoast Utility Auth., FL: Moody’s upgraded this utility authority to Aa2 from Aa3. The upgrade to Aa2 reflects the authority’s moderate size, stable and affluent service area that is mostly built out, and diverse customer base. The rating also incorporates very strong financial metrics including high cash levels and favorable debt service coverage, manageable debt burden, and adequate legal provisions.
- York (County of), SC: Moody’s upgraded this county to Aa3 from A1. The upgrade to Aa3 reflects the system’s consistently strong debt service coverage and liquidity. The rating also incorporates the system’s growing customer base due to its proximity to the Charlotte MSA, modest debt ratio that is expected to increase in the near-term due to system expansion, and satisfactory legal provisions.
- Sienna Plantation Levee Improv. Dist.,TX: Moody’s upgraded this district to Aa3 from A1. The Aa3 rating and upgrade reflects the district’s large tax base that is predominately residential in nature that continues to experience solid growth, as well as stable financial metrics which are driven by stable property tax collections and a history of balanced operations. The rating also takes into consideration the district’s manageable direct debt burden, high overlapping debt burden, and lack of pension obligation.
- City of Shelby, NC: Moody’s upgraded this city to A1 from A3. The upgrade to A1 reflects the system’s stable regional economy and strong customer base; the well-managed financial operations providing strong debt service coverage and ample liquidity; low debt profile with rapid principal payout, and satisfactory legal protection for bondholders. The rating additionally incorporates the system’s high-fixed cost structure and significant exposure to the debt of the North Carolina Municipal Power Agency Number 1 (NCMPA1).
- Hacienda La Puente Unified School District, CA: Moody’s upgraded this school district to Aa2 from Aa3. The upgrade to the Aa2 rating reflects the district’s strong financial position, resulting from six years of consecutive operating surpluses and a trend of healthy reserve and liquidity levels. The upgrade also reflects our expectation that the district’s strong management practices will preserve the district’s strong financial position. The Aa2 rating also reflects the district’s sizeable and growing tax base that benefits from its location in the Los Angeles economy, which is supported by an average socioeconomic profile of district residents. The district has a low debt burden and somewhat elevated pension burden that has been incorporated into the current rating.
- Sarasota County, FL: Moody’s upgraded this county to Aa3 from A2. The upgrade to Aa3 reflects the system’s stable debt service coverage with strong liquidity, large growing service area and small debt burden. The rating also reflects the system’s adequate capacity.
Farwell Area Schools, MI: Moody’s downgraded this school district to A2 from A1. The downgrade to the A2 rating reflects the district’s narrow General Fund reserves and liquidity which have been negatively impacted by stagnant revenue trends due to declining student enrollment. Also incorporated in the rating is the district’s moderately-sized, residential tax base in central Michigan (Aa2 positive); well below average resident income characteristics; modest debt burden; as well as exposure to a statewide cost-sharing pension plan with significant unfunded liabilities.
Monroeville Municipal Authority, PA: Moody’s downgraded this authority to Baa1 from A3. The downgrade to Baa1 incorporates the authority’s inadequate coverage of debt service by net operating revenues. The rating also reflects the authority’s solid and stable user base, modest debt burden, and a manageable portfolio of capital assets.
Buffalo (City of), MN: Moody’s downgraded this city to A3 from Aa3. The A3 rating reflects the city’s extremely narrow General Fund cash position supported by alternate liquidity in the Electric Fund, enterprise risk associated with imbalanced operations in the civic center and golf course that have required ongoing support, weakening financial position in the Water and Sewer Fund, and elevated debt burden. Additionally, the rating incorporates a moderately sized tax base and average wealth levels.
Mission Hospital, TX: Moody’s downgraded this hospital to Baa3 from Baa2. The downgrade to Baa3 is based on several years of declining absolute and relative liquidity position primarily from recurring delays in supplemental funding payments from the state. The rating also reflects the decline in financial performance in recent years, emblematic of the reliance on supplemental funding as the only not-for-profit hospital in the service area, as well as declining inpatient volumes.
Maple Heights, OH: Moody’s downgraded this city to Ba2 from Baa3. The downgrade to Ba2 reflects the continued deterioration of the city’s financial position based on fiscal 2013 financial results, as well as the city’s recent failure to make timely payment on three Ohio Water Development Authority (OWDA) loans. Additionally, the rating incorporates the city’s weak economic, tax base and demographic fundamentals which have continued to decline since the recession; extremely narrow liquidity and reserves across all governmental funds; average debt burden and above average exposure to unfunded pension liabilities based on participation in two statewide cost-sharing plans.
Keokuk Community School District, IA: Moody’s downgraded this school district to A2 from A1. The downgrade to A2 reflects the district’s recent deficit spending and erosion of General Fund reserves. The downgrade also considers the district’s negative enrollment trend, below average socio-economic profile coupled with elevated economic concentration and unemployment, and a manageable debt burden.
Omaha Convention Hotel Corporation, NE: Moody’s downgraded this corporation to A2 from A1. The A2 rating reflects the City of Omaha’s backstop pledge to fund any debt service shortfall as well as the city’s fundamental credit strengths and challenges, including: its sizable tax base and role as the economic center for the State of Nebraska (Aa2 stable); satisfactory financial position; as well as its substantial long-term liabilities including considerable debt and outsized pension obligations.
Yonkers Industrial Development Agency, NY: Moody’s downgraded this agency to Baa2 from Ba1. The rating action is based on the continued deterioration of the bond program’s financial position. Cash flow projections demonstrate parity insufficiency in 10 years and a revenue insufficiency prior to final bond maturity due to a mismatch between the maturity of the credit-enhanced mortgage on July 1, 2035 and final bond maturity on November 1, 2036. The Ba2 reflects the possibility for rising interest rates to mitigate the severity of the revenue insufficiency.