As the Detroit Water and Sewerage Department's bond rating falls deeper into junk territory, the Karegnondi Water Authority has been assigned an initial A2 rating by Moody's in advance of this first bond sale.
The Bond Buyer article details some of the particulars about the KWA's bonding offering:
"In light of Flint's severe fiscal distress — the city has been under state controlled emergency management since late 2011 — the bonds feature a back-up pledge from Genesee County.The bonds sold by Genesee County will mature in 30 years and are payable from the water supply contracts as well as Long Term General Obligation (LTGO) pledges of the City of Flint and Genesee County.
"The governments expect to make their payments from the system's revenues, but the debt carries the limited-tax general obligation pledge of both credits. Genesee has promised to cover Flint's payments within 15 days if the struggling city is unable to make its payments.
* * *
"Flint is set to no longer receive water from the DWSD as early as April 17, relying on its own water treatment plant and water drawn from the Flint River. The city expects to see significant savings from the move.
"Genesee will pursue a separate contract with the Detroit system through at least 2016. The DWSD and Genesee are also negotiating a separate contract that would require Detroit to provide a long-term emergency stand-by service if the new system fails.
For more background on the Karegnondi Water Authority, click here.
For more about DWSD Update, click here.
Update (4/2): Bloomberg is reporting (here) that KWA completed its $220 million bond sale yesterday.
"The water agency's sale included debt maturing as late as November 2043 that priced to yield 4.89 percent, or about 1.2 percentage points more than benchmark munis. The securities are rated A2 by Moody's Investor Service, five steps below the top."