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Delaware Valley Regional Finance Auth., PA -- Moody's assigns A1 rating to Delaware Valley Reg Fin Auth, PA's $50 million Local Govt Rev Bonds, 2021 Series A; outlook stable

·12 min read

Rating Action: Moody's assigns A1 rating to Delaware Valley Reg Fin Auth, PA's $50 million Local Govt Rev Bonds, 2021 Series A; outlook stable

Global Credit Research - 13 Jan 2021

New York, January 13, 2021 -- Moody's Investors Service has assigned an A1 rating to Delaware Regional Finance Authority, PA's (DelVal) $50 million Local Government Revenue Bonds, 2021 Series A. We maintain an A1 rating on approximately $1.05 billion of outstanding parity debt. The outlook is stable.

RATINGS RATIONALE

The A1 rating incorporates DelVal's consistent performance over its thirty year history, through various credit cycles and interest rate environments. The rating reflects the robust credit quality of pool participants, supported by DelVal's satisfactory underwriting criteria; minimal exposure to put risk as variable rate demand bonds represent about 20.6% of DelVal's total debt; and adequate diversification of swap counterparties.

The A1 rating also considers the program's healthy cash and reserve balances, sufficient asset-to-debt coverage projections under various stressed scenarios and comprehensive management. The rating also speaks to DelVal's complex debt and legal structure, which necessitates a high level of management oversight, currently concentrated with a single program administrator.

We regard the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety. We have incorporated our current understanding of impacts to DelVal's operations and finance performance, and do not believe the program is susceptible to immediate material credit risks related to coronavirus at this time.

RATING OUTLOOK

The outlook is stable given continued strong underwriting provisions, seasoned management, and effective program structure as evidenced by resilient performance through the financial crisis as well as forward-looking stress scenarios.

FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATING

- Significantly improved asset to debt coverage

FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATING

- Credit quality deterioration of pool participants and/or swap counterparties

- Management event that disrupts pool's operations for an extended period

LEGAL SECURITY

DelVal bonds are special limited obligations of the authority, secured by loan and other revenues. The underlying participant loans are primarily secured by general obligation, full faith and credit tax pledges.

USE OF PROCEEDS

Proceeds from the 2021 Series A bonds will be used to originate or acquire loans to local governments within the Commonwealth of Pennsylvania (Aa3 stable).

PROFILE

DelVal was created in 1985 by the four counties of Delaware (Aa1), Montgomery (Aaa stable), Bucks (Aaa negative), and Chester (Aaa stable) with the objective of providing market access and low cost loans to local municipal borrowers in the southeastern Pennsylvania (Aa3 stable) region. The average loan size is approximately $2.5 million. DelVal has no direct employees and is governed by a five-member board with staggered appointments from each of the four founding counties and one seat rotating among the counties. The board monitors the pool's performance on a monthly basis, approves all new loans, and approves significant operating decisions including issuing new debt and changing trustees. Daily operations of the authority are primarily conducted by the program administrator, the solicitor, bond counsel, and the bond trustees.

METHODOLOGY

The principal methodology used in this rating was Public Sector Pool Programs and Financings Methodology published in April 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBM_1171420. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Nicolanne Serrano Lead Analyst Regional PFG Northeast Moody's Investors Service, Inc. 7 World Trade Center 250 Greenwich Street New York 10007 US JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Chandra Ghosal Additional Contact Municipal Supported Products JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Releasing Office: Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653

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