South Valley Water Reclamation Facility, UT Outlook Revised To Positive On Member City#s Improving Credit Quality

Stocks and Financial Services Press Releases Wednesday June 20, 2018 09:30
CENTENNIAL--20 Jun--S&P Global Ratings

CENTENNIAL (S&P Global Ratings) June 19, 2018--S&P Global Ratings revised the outlook to positive from stable and affirmed its 'A+' long-term rating on the South Valley Water Reclamation Facility (SVWRF), Utah's series 2014 sewer revenue refunding bonds. At the same time, S&P Global Ratings assigned its 'A+' long-term rating to the SVWRF's series 2018 sewer revenue bonds. The outlook is positive.

The positive outlook reflects our view that there is at least a one-in-three chance that we could raise the rating if the overall credit quality of one of the participants, Midvale City, continues to improve. "This assumes that our view of the credit quality of the other two participants contributing payments on the parity obligation, South Valley Sewer District (SVSD) and West Jordan, does not weaken," said S&P Global Ratings credit analyst Malcolm D'Silva. The primary credit factors that we would examine in order to ascertain the extent of any improvement would likely be the following:

  • Continuation of Midvale's rising income metrics due to economic growth, notably in commercial and residential development, which could lead to an overall improvement in our view of the city's economic risk profile
  • Midvale's maintenance of all-in coverage metrics and liquidity that continue to trend positively as the city embarks on its six-year capital improvement plan (CIP)

The series 2018 bonds are secured by debt service assessments paid by SVSD and West Jordan from their respective sewer systems. SVSD is obligated to pay about 44% of debt service, and West Jordan the remaining 56%. SVWRF levies the debt service assessments as part of its charges for wastewater treatment. For the parity series 2014 bonds, West Jordan is obligated to pay about 88% of debt service, and Midvale the remaining 12%. There are no step-up provisions or requirements--each member participant is only obligated to pay its share. Therefore, our analysis is based on a weak link of the three systems. "Given the members' underlying credit quality, we view Midvale to be the weak link of the three systems," Mr. D'Silva added.

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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