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Oxford (City of) AL -- Moody's assigns Aa2 to Oxford, AL's Series 2020 GOLT warrants

·12 mins read

Rating Action: Moody's assigns Aa2 to Oxford, AL's Series 2020 GOLT warrants

Global Credit Research - 26 Aug 2020

New York, August 26, 2020 -- Moody's Investors Service has assigned a Aa2 to Oxford (city of), AL's $47.7 million Taxable General Obligation Warrants, Series 2020B and $5.8 million Tax-Exempt General Obligation Warrants, Series 2020C. Moody's maintains a Aa2 on the city's outstanding issuer and general obligation limited tax warrants.

The issuer rating incorporates Moody's assessment of the city's implied general obligation unlimited tax pledge, however no debt is associated with this security. The pledge supporting the city's outstanding GO debt is limited based upon Alabama's (Aa1 stable) constitutional property tax limits.

RATINGS RATIONALE

The Aa2 reflects the city's moderately-sized and growing tax base, very strong and stabilizing financial position, and elevated debt burden that is expected to remain high in the near-term.

The absence of distinction between the Aa2 rating on the city's GOLT debt and the city's Aa2 issuer rating is based on the city's pledge of its full faith and credit.

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 for Oxford. The city maintains extremely strong reserves and along with a very board sales tax, helps mitigates against its reliance on sales tax revenues. Fiscal 2020 sales tax revenues are only slightly trailing fiscal 2019 sales tax revenues. However, the situation surrounding coronavirus is rapidly evolving and the longer term impact will depend on both the severity and duration of the crisis. If our view of the credit quality of the city changes, we will update the rating and/or outlook at that time.

RATING OUTLOOK

Moody's typically does not assign outlooks to local government credits with this amount of debt outstanding.

FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS

- Decreases in debt levels (issuer rating)

- Sizeable tax base expansion (issuer rating)

- Maintenance of strong reserves that approximate current levels (issuer rating)

- Upgrade of issuer rating (GOLT rating)

FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS

- Increases in debt levels that reduces financial flexibility (issuer rating)

- Material declines from current fund balance and liquidity levels (issuer rating)

- Downgrade of issuer rating (GOLT rating)

LEGAL SECURITY

The warrants will be secured by the city's general obligation limited tax pledge and its full faith and credit. The warrants are additionally secured by the revenues from its gross receipts tax levied by the city.

USE OF PROCEEDS

The Series 2020 B warrants will be used to refund a portion of the city's outstanding Series 2013 A, 2014 B, 2015 A, 2017 A, and 2018 A warrants for positive net present value savings.

The Series 2020 C warrants will be used to finance various city capital improvements.

PROFILE

The City of Oxford is located in northeast Alabama (Aa1 stable) in Calhoun, Cleburne and Talladega Counties. The city's estimated population as of 2018 was 21,208.

METHODOLOGY

The principal methodology used in these ratings was US Local Government General Obligation Debt published in July 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBM_1230443. 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_1133569.

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.

Susanne Siebel 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 Robert Weber 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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