Report: Credit Quality Remains Strong for Clean, Drinking Water SRF Programs

According to a recent report released by Standard & Poor?s, bonds issued under U.S. clean water and drinking water state revolving fund programs (SRFs) continue to enjoy very strong and stable credit quality.
In the commentary, ?U.S. Clean And Drinking Water State Revolving Fund Programs Maintain Exceptionally Strong Credit Quality,? Standard & Poor?s notes that SRF bonds? fundamental credit strengths continue to include robust financial policies and practices, exceptionally low borrower payment delinquencies or defaults and maintenance of either significant reserves or high annual coverage of bond debt service.

Amendments to the Clean Water Act established the clean water program in 1987 and the drinking water program in 1996. The U.S. Environmental Protection Agency (EPA) oversees state-level management of both.
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?As in the past, we expect our ratings on this sector to remain very high and stable ? all but three of the SRFs we rate have ?AAA? ratings, and the remaining three are ?AA? or higher,? said Standard & Poor’s credit analyst James Breeding.

Standard & Poor’s maintains ratings on clean water and drinking water revolving fund bonds in 27 states. These rated programs have about $30 billion of debt outstanding. The SRF programs either make loans to local entities or purchase bonds local entities issue to support projects that state agencies (typically a Department of Health or a Department of Environmental Protection) have previously approved. The programs rated provide assistance to nearly 6,000 communities of vastly different sizes, with New York City Municipal Water Finance Authority the largest participant.

?Given the ongoing national need for clean and drinking water projects, we expect activity within this sector to remain robust,? added Breeding.

The report is available to subscribers of RatingsDirect at www.globalcreditportal.com and at www.spcapitaliq.com. If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-7280 or sending an e-mail to research_request@standardandpoors.com.

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