Published: March 19, 2010
Fitch Rates Castaic Lake Water Agency, California Rev COPs 'A+'; Outlook Stable
NEW YORK - (BUSINESS WIRE) - Fitch Ratings assigns the following rating to Castaic Lake Water Agency,
California (CLWA):
--$68.1 million revenue refunding certificates of participation (COPs),
series 2010A (2001 refunding project) at 'A+'.
The bonds are expected to sell via negotiation as early as the week of
March 22. Proceeds will be used to current refund CLWA's outstanding
2001A COPs, which are senior lien obligations, fund a debt service
reserve, and pay costs of issuance.
In addition, Fitch affirms the following ratings on CLWA's outstanding
COPs:
--$136.0 million of outstanding senior lien COPs (prior to the
refunding) at 'AA-';
--$169.9 million of outstanding parity lien COPs, which are subordinate
to the senior lien COPs, at 'A+';
The Rating Outlook is Stable.
RATING RATIONALE:
--CLWA's financial position is solid, although there has been some
fluctuation in operating performance from year to year.
--While existing debt ratios are somewhat high, capital needs are
manageable, with only moderate additional debt issuances planned over
the near term.
--Long-term water supplies are sufficient to meet member demands.
--The relatively narrow economic base is largely residential in nature.
KEY RATING DRIVERS:
--Maintenance of sound and stable fiscal operations will enhance the
financial profile.
--Diversification in the service area economy would broaden the customer
base.
SECURITY:
The bonds are payable solely from a pledge of net water revenues of the
agency after payment of operations and maintenance (O&M) expenses and
debt service costs associated with the outstanding senior lien
certificates (the senior lien is closed). Net revenues also include
facility capacity fees and ad valorem taxes not levied for payment of
State Water Project (SWP) obligations. In addition, amounts on deposit
in the rate stabilization fund are pledged to certificate holders.
CREDIT SUMMARY:
Financial operations of the agency are favorable, with the most recently
audited fiscal year (2009) posting total annual debt service (ADS)
coverage of 1.8 times (x). Liquidity and cash flows for the same period
appear to be healthy, although analyses is limited by the use of
governmental fund accounting (as opposed to proprietary fund accounting)
and the $197 million in cash and investments recorded in fiscal 2009
includes restricted funds. Fiscal 2010 figures are projected to be
slightly lower with total ADS at 1.2x. Nevertheless, performance is
projected to quickly rebound to 1.4x by fiscal 2011 and averages 1.5x
over the fiscal 2010 to 2014 period. For fiscal 2010 CLWA faces some
pressure, predominantly on the revenue side as a result of drought
conditions and reduced connection fees. CLWA also has budgeted for a
reduction in ad valorem property taxes as a result of capture by the
state. However, CLWA's board has taken appropriate measures to increase
its rate base annually through fiscal 2012. This is expected to lead to
continued solid operating performance in fiscal 2010 and out-year
projections indicate further improvement.
Capital needs through fiscal 2012 total approximately $160 million and
are designed to increase supplies and improve system reliability. The
majority of capital costs are expected to be funded from proceeds of a
previous issuance, although CLWA may issue around $60 million-$70
million in the fiscal 2012 timeframe to supplement available funding.
While current debt levels are moderately high, the overall debt burden
including the proposed offering is not expected to rise significantly.
Located predominantly in Los Angeles County approximately 35 miles
northwest of downtown Los Angeles, CLWA provides wholesale water service
to a population of approximately 260,000 persons through four retail
agencies. The agency acts as a swing supplier, providing around 50% of
the region's water supplies, with the remainder derived from members'
own local sources. The agency's water supplies mostly come from Northern
California's San Francisco Bay/Sacramento-San Joaquin River Delta via
the SWP. While SWP supplies have been impacted by recent litigation, the
agency projects that it has sufficient allocations from the SWP,
combined with other water resources, to meet all retail demands through
at least 2030.
Applicable criteria available on Fitch's website at www.fitchratings.com:
--'Revenue-Supported Rating Criteria, Dec. 29, 2009.
--'Water and Sewer Revenue Bond Rating Guidelines', Aug. 6, 2008.
Additional information is available at www.fitchratings.com.
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND
DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING
THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS.
IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE
AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE WWW.FITCHRATINGS.COM.
PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS
SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS
OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES
AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF
THIS SITE.
Fitch Ratings
Julie Seebach, +1-512-215-3740 (Austin)
Robert
Sakai, +1-415-732-5628 (San Francisco)
or
Cindy Stoller,
+1-212-908-0526
(Media Relations, New York)
cindy.stoller@fitchratings.com
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