Fort Worth Independent School District, TX -- Moody's assigns Aa1 UND/Aaa ENH to Fort Worth ISD, TX's GOULT Bonds, Series 2020; outlook stable
Rating Action: Moody's assigns Aa1 UND/Aaa ENH to Fort Worth ISD, TX's GOULT Bonds, Series 2020; outlook stable
Global Credit Research - 10 Jul 2020
New York, July 10, 2020 -- Moody's Investors Service has assigned a Aa1 underlying rating to Fort Worth Independent School District, TX's $140 million Unlimited Tax School Building Bonds, Series 2020. Moody's maintains the Aa1 rating on the district's outstanding general obligation debt. In addition to the underlying rating, Moody's has assigned a Aaa enhanced rating to the Series 2020 bonds reflecting the guarantee of the Texas Permanent School Fund (PSF). The outlook is stable.
RATINGS RATIONALE
The Aa1 rating reflects the district's very large tax base that serves as an economic driver of the strong Dallas - Fort Worth metropolitan area. In addition, the rating incorporates strong fiscal management resulting in stable financial operations and healthy reserves. Furthermore, the rating reflects an above average but manageable debt burden with plans for additional debt, as well as manageable pension and total fixed cost burdens.
The Aaa enhanced rating is based on the rating of the Texas Permanent School Fund and the structure and legal protections of the transaction which provide for timely payment by the PSF if necessary. Moody's currently rates the Texas Permanent School Fund Aaa with a stable outlook.
We regard the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety. The coronavirus crisis is not a key driver for this rating action. We do not see any material immediate credit risks Fort Worth Independent School District, given the majority of its revenues are from property taxes and state aid. However, the situation surrounding coronavirus is rapidly evolving and the longer term impact will depend on both the severity and duration of the crisis. The district's expenditures are expected to be marginally affected by COVID-19. If our view of the credit quality of Fort Worth Independent School District changes, we will update the rating and/or outlook at that time.
RATING OUTLOOK
The stable outlook reflects our expectation that despite challenges due to ongoing enrollment declines, the district's operations and reserves will remain healthy. The outlook further reflects our expectation that taxable values will remain stable given the district's location within the Dallas-Fort Worth metro area.
FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS
- Material moderation of debt burden
- Trend of operational surpluses bolstering reserves
- Improved resident wealth and income profile
- Not applicable (enhanced)
FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS
- Significant decline of the tax base
- Material increase of the debt burden
- Continued trend of operating deficits weakening reserves
- Downgrade by Moody's of the Texas Permanent School Fund rating (enhanced)
LEGAL SECURITY
Principal and interest on the bonds are payable from the proceeds of an annual ad valorem tax, without legal limitation as to rate or amount, levied against all taxable property within the district. The bonds are further secured by the Texas Permanent School Fund's commitment to pay debt service if necessary.
USE OF PROCEEDS
Proceeds form Series 2020 bonds will be used for capital improvements within the district.
PROFILE
Fort Worth Independent School District is located in Tarrant County (Aaa stable) and serves a majority portion of the City of Fort Worth (Aa3 stable). The district owns and operates 143 schools and serves an enrollment base of 84,500.
METHODOLOGY
The principal methodology used in the underlying rating was US Local Government General Obligation Debt published in September 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBM_1191097. The principal methodology used in the enhanced rating was Rating Transactions Based on the Credit Substitution Approach: Letter of Credit-backed, Insured and Guaranteed Debts published in May 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1068154. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.
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.
The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website 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_1133569.
The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.
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.
LeRoy Ousley Lead Analyst Regional PFG Dallas Moody's Investors Service, Inc. Plaza Of The Americas 600 North Pearl St. Suite 2165 Dallas 75201 US JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Thomas Jacobs Additional Contact Regional PFG Northeast 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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