Texas school district gets third rating downgrade to junk
Bloomberg News
Texas’ DeSoto Independent School District was hit with another downgrade to the junk level when Moody’s Ratings on Thursday lowered its underlying general obligation bond rating to Ba1 with a negative outlook from Baa3.
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Last week, S&P Global Ratings
Moody’s said the downgrade “reflects worse-than-anticipated unaudited fiscal 2026 results, which leave the district with very little financial flexibility, and our expectation that declining financial reserves will continue through fiscal 2027 year-end.”
“This distress is compounded by the reliance on bank relationships to support cash flow, indicative of the extremely limited financial flexibility,” the rating agency added.
While the district of about 5,500 students made substantial year-over-year expenditure cuts to move closer to a structurally balanced budget, its path to rebuilding reserves remains unclear, according to Moody’s.
“Although management does not anticipate additional cash-flow borrowing, generating sufficient revenue to meet daily expenses will remain a challenge through fiscal 2027, at a minimum, because the district held just under $9 million in general fund cash as of October 23, 2026,” the rating agency said.
DeSoto ISD, which has had
The district last sold GO bonds shortly after receiving
Prior to that sale, the district had $89.2 million of outstanding bonds, according to its fiscal 2025 audit. The majority of the debt was rated triple-A with the PSF guarantee, while Series 2019 and Series 2015 B bonds were insured by BAM Mutual.
