GWA Bond Offering Gets an “A-” Rating From S&P; Stable Outlook


Guam –  GWA Tuesday got an “A-” rating from S&P, along with a Stable Outlook for the GWA Series 2013 water and wastewater system revenue bonds.

According to S&P this was based on several factors:

* GWA’s stable financial outlook.
* Addressing huge operational milestones in the mandated Court Order (CO).
* The supportive Public Utilities Commission (PUC).
* A minimal dependence on Government of Guam as a customer, as well as a closed flow of funds that precludes any transfer of surplus net revenues to the Government.
* Furthermore, this is the first time GWA has been rated by S&P and its investment grade rating to A- is higher than the ratings currently provided by the other rating agencies, Fitch and Moody’s which are BB.
* Finally this is 5 notches higher than the investment grade ratings previously given to GPA and GIAA by S&P

Chairman of the CCU Simon Sanchez said, “This is great news for our ratepayers as it will allow us to borrow money at a lower interest rate and of course pass those savings on to our community and thereby reducing future rate increases.”

Sanchez went on to say, “Our rate payers deserve a huge note of thanks for enduring increasing water rates as our utility catches up with the years of neglect, and on behalf of the CCU we would also like to extend our thanks to the Governor, Lt Governor, Senators, the PUC and the Mayors who have supported GWA over the years. This investment grade rating is a reflection of the sacrifice of the entire island to improve our utility and protect our water and ocean resources.” Sanchez concluded.

Martin Roush, General Manager of GWA also added his heartfelt thanks “I would personally like to thank our 316 employees who are the backbone of the Authority and do a lot with a little, our elected CCU members, the entire Legislature especially Senator Ada our oversight Chair, and the members of the PUC who have all supported these efforts.”

READ the statement issued by S&P below:

Guam Waterworks Authority’s 2013 Water, Wastewater Revenue Bonds Rated ‘A-‘ DALLAS (Standard & Poor’s) Nov. 4, 2013–Standard & Poor’s Ratings Services said today it assigned its ‘A-‘ rating and stable outlook to Guam Waterworks Authority’s (GWA) series 2013 water and wastewater system revenue bonds.

“The stable outlook is based on our expectation that the financial projections and operational milestones in addressing the mandated projects are
achievable,” said Standard & Poor’s credit analyst Theodore Chapman.

The rating is based on our opinion of the authority’s general creditworthiness, which includes:

    A financial turnaround that has helped bolster and stabilize debt service coverage (DSC) and will likely lead to improved working capital levels;
    A supportive relationship with the territory’s Public Utility Commission, including an October 2013 approval of five years of future rate increases, all based on an assumed 1.75x annual DSC;
    Minimal direct financial interaction with the general government (GovGuam; BB-/Stable), including no dependence on GovGuam as a customer and a closed flow of funds that preclude any transfer of surplus net revenues to GovGuam; and
    Significant progress to date on many of its mandated capital improvement projects.

Factors that for now temper a higher rating include:

    An economy that, despite steady improvements, is disproportionately susceptible to shocks from external events such as global economic cycles and natural disasters;
    A $457 million capital improvement program through 2018 – about half of which is still nondiscretionary and is driven by a 2011 court order – that will be about 80% debt-funded; and
    A system that, although has seen substantial improvement in the condition of its assets, will still require capital-intensive upgrades and enhancements over time even beyond the items associated with the 2011 court order.

The 2013 bonds are secured by a first-lien pledge on the net revenues of GWA’s retail waterworks and sanitary sewer system. As of September 2013, the system
had about $200 million in long-term parity revenue bonds – all fixed rate, as well as about $23 million in subordinate-lien loans with the Bank of Guam.

USPF Criteria: Standard & Poor’s Revises Criteria For Rating Water, Sewer, And Drainage Utility Revenue Bonds, Sept. 15, 2008

Guam Waterworks Authority’s 2013 Water, Wastewater Revenue Bonds Rated ‘A-‘