Navajo Nation, AZ GO Rating Raised To #A# From #BBB+# On The Application Of Our New Criteria

Stocks and Financial Services Press Releases Thursday May 31, 2018 09:16
CENTENNIAL--31 May--S&P Global Ratings

CENTENNIAL (S&P Global Ratings) May 30, 2018--S&P Global Ratings raised its long-term rating to 'A' from 'BBB+' on the Navajo Nation's (headquartered in Window Rock, Ariz.) series 2015A general obligation (GO) refunding bonds. At the same time, S&P Global Ratings affirmed its 'A' issuer credit rating (ICR) on the Navajo Nation. The outlook is stable.

"The rating action is based on our understanding of the Nation's willingness and ability to support the 2015A bonds on par with the ICR, as it relates to our 'Issue Credit Ratings Linked To U.S. Public Finance Obligors' Creditworthiness' criteria, published Jan. 22, 2018, on RatingsDirect," said S&P Global Ratings credit analyst Michael Parker.

In our opinion, the ability to pay the series 2015A bonds is closely tied to the Nation's operations, which is reflected in the ICR. In determining the ICR, S&P Global Ratings evaluates all operational aspects and credit features of the Nation that we believe would affect its ability and willingness to pay on a timely basis. Although the pledge for the series 2015A bonds excludes sizable revenues and the majority of the Nation's unencumbered reserves, any limitations on available revenue or limits imposed on the Nation's ability to raise revenue are embedded in our assessment of the Nation's general creditworthiness.

The rating reflects our opinion of the Nation's:
  • Very strong reserves, additionally bolstered when including the Nation's permanent fund and a self-created endowment fund (although not specifically pledged);
  • Revenue-generating natural resource assets, coupled with additional revenue streams;
  • Low debt burden; and
  • Good management policies that support permanent fund growth.We believe offsetting factors include the Nation's:
  • Slightly concentrated reliance on the natural resource sector, both directly through royalty revenues and indirectly through tax revenues, based on leasing land and other business activity closely tied to the oil and gas industry;
  • Significant operational funding interdependencies with the federal government; and
  • Uncertainty regarding possible future debt terms.

The stable outlook reflects our expectation that the Nation's revenues will be sufficient to support operations. The stable outlook also reflects our view that the Nation will maintain its financial flexibility through its permanent fund (although not pledged to the bonds) and that its carrying charges will remain low.

We could raise the rating on the bonds if the Nation's revenue makeup became more diverse, with less reliance on natural resources for general fund revenue.

If we view natural resource management practices to have detrimental effects on long-term revenue stability and growth, or if the Nation's financial profile weakens due to the closure of the Navajo Mine, we could lower the rating.

Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at www.standardandpoors.com for further information. Complete ratings information is available to subscribers of RatingsDirect at www.capitaliq.com. All ratings affected by this rating action can be found on S&P Global Ratings' public website at www.standardandpoors.com. Use the Ratings search box located in the left column.


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