Moody's rates W. Palm Beach utility bonds A1

Moody's Investors Service said it assigned an A1 rating and a negative outlook to utility system refunding revenue bonds issued by West Palm Beach, Fla., including the $54 million series 2008A and $14 million series 2008B.

The expected sale date is June 30.

Proceeds of the series A fixed-rate bonds will refund the city's series 2005 variable-rate revenue bonds and fund a termination payment of about $2 million due on cancellation of the swap agreement associated with the 2005 bonds. The series B fixed-rate bonds provide $14 million in new money financing for the utility's current-year capital needs, primarily water treatment facility upgrades.

Moody's affirmed the A1 rating on $90 million in outstanding parity debt. Assignment of the negative outlook reflects the utility's weakened financial position, including reductions in debt service coverage, cash and net working capital, deferrals of payments-in-lieu-of-taxes and weakness in Florida's local economy that could further depress water consumption and revenues.

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