Las Vegas water agency scores AAA rating ahead of deal
Bloomberg News
The Las Vegas Valley Water District has a brand-new AAA rating from KBRA ahead of its plans to price $604 million in a combined new money and refunding transaction.
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KBRA assigned a stable outlook when it issued the rating Tuesday.
The triple-A rating, added to two existing AA-plus-level ratings, should bolster the appeal of the limited tax general obligation bonds,
Hobbs Ong & Associates and PFM Financial Advisors are municipal advisors for the bond sale, with Taft as bond counsel and Stradling as disclosure counsel.
Morgan Stanley will run the books on both series, according
Proceeds from the Series C issuance will fund essential capital improvement projects across the Southern Nevada Water Authority’s system, including pumping stations, reservoirs, and pipelines, while Series D will refund existing project debt.
The water district is the primary retail purveyor of potable water to the City of Las Vegas and broad portions of Clark County. Together with surrounding municipalities — including Henderson, North Las Vegas, Boulder City, and Mesquite— it formed the Southern Nevada Water Authority to manage wholesale water treatment and distribution sourced primarily from the Lake Mead reservoir on the Colorado River.
The limited tax GOs will be additionally secured by SNWA pledged revenues.
Analyst reports highlight the district’s strong financial backing and prudent fiscal management.
Moody’s Ratings Tuesday affirmed its Aa1 rating of the water district’s limited tax and GO bonds. S&P Global Ratings in May affirmed its AA-plus rating. Both assign stable outlooks.
KBRA also assigned its AAA rating and stable outlook to the district’s outstanding parity limited tax general obligation debt.
The credit positives cited by KBRA analysts included “a large and diverse economic and property tax base, an experienced management team with sophisticated long-term modeling that results in consistently strong financial performance with robust coverage of annual debt service, and significant liquid reserves.”
The bonds represent direct and general obligations of the water district, backed by its full faith and credit as well as pledged revenues from the Southern Nevada Water Authority.
The district holds the legal authority to levy ad valorem property taxes to cover debt service, though it has never needed to.
“The district has never levied an ad valorem property tax for the repayment of GO debt,” KBRA analysts wrote. “Instead, debt service has been paid from the operations of the underlying utilities.”
“The district’s strong management team has a history of maintaining a solid financial profile, including adequate coverage and very strong liquidity,” Moody’s wrote Tuesday.
The bond rating agencies continue to monitor potential long-term regional headwinds, particularly regional water availability and economic concentration.
Credit challenges cited by KBRA include that the regional economy, despite some diversification, remains sensitive to fluctuations in the tourism and gaming industries.
KBRA also noted that its location in the arid southwestern U.S. and resultant
KBRA acknowledged that the district and SNWA “have been in the forefront of water conservation efforts, reducing annual water usage within its service area while also banking water resources likely sufficient to meet the region’s needs over the next 10 to 15 years.”
