U.S. markets open in 8 hours 19 minutes
  • S&P Futures

    3,361.50
    +15.50 (+0.46%)
     
  • Dow Futures

    27,609.00
    +127.00 (+0.46%)
     
  • Nasdaq Futures

    11,443.00
    +48.25 (+0.42%)
     
  • Russell 2000 Futures

    1,513.20
    +6.70 (+0.44%)
     
  • Crude Oil

    40.40
    -0.20 (-0.49%)
     
  • Gold

    1,886.50
    +4.20 (+0.22%)
     
  • Silver

    23.71
    +0.11 (+0.45%)
     
  • EUR/USD

    1.1681
    +0.0012 (+0.11%)
     
  • 10-Yr Bond

    0.6630
    0.0000 (0.00%)
     
  • Vix

    26.19
    -0.19 (-0.72%)
     
  • GBP/USD

    1.2861
    +0.0019 (+0.15%)
     
  • USD/JPY

    105.5700
    +0.0510 (+0.05%)
     
  • BTC-USD

    10,704.45
    +1.94 (+0.02%)
     
  • CMC Crypto 200

    229.47
    +5.54 (+2.48%)
     
  • FTSE 100

    5,927.93
    +85.26 (+1.46%)
     
  • Nikkei 225

    23,586.08
    +74.46 (+0.32%)
     

Penn Hills School District, PA -- Moody's assigns A2 enhanced rating to Penn Hills School District, PA's $25 million General Obligation Bonds, Series A of 2020

Rating Action: Moody's assigns A2 enhanced rating to Penn Hills School District, PA's $25 million General Obligation Bonds, Series A of 2020

Global Credit Research - 19 Aug 2020

New York, August 19, 2020 -- Moody's Investors Service has assigned an A2 enhanced rating to Penn Hills School District, PA's $25.2 million General Obligation Bonds, Series A of 2020 (Federally Taxable). Moody's maintains A2 and A3 enhanced ratings on Penn Hills' outstanding general obligation limited tax (GOLT) debt, affecting roughly $127.1 million in rated parity debt outstanding. Moody's also maintains a Caa2 issuer level and general obligation limited tax ratings for the district's rated parity debt. The Series A of 2020 bonds do not carry an underlying rating.

All of the district's rated debt is supported by a GOLT pledge, based on the limited ability of Pennsylvania school districts to increase their property tax levy above a preset index.

RATINGS RATIONALE

The district's Caa2 issuer and GOLT ratings reflect its weak, though improving, liquidity position, as well as its prolonged structurally imbalanced operations, which have resulted in a substantial cumulative deficit. The Caa2 rating speaks to the fact that the district has a history of being unable to meet all of its cash obligations on time and in full, and has relied on the commonwealth's state aid intercept program to meet its April debt service obligation in the five years preceding fiscal 2019, though the district did not rely on the intercept in fiscal 2020. The rating further reflects our view that, in the absence of state assistance, it is unlikely that bondholders would achieve full recovery in the event of a district default.

The absence of distinction between the Issuer and GOLT ratings reflect Pennsylvania school districts' ability to apply for exceptions to the cap on property tax increases in order to cover debt service, the commonwealth's history of granting such exceptions, and the district's full faith and credit pledge supporting all general obligation debt.

The district's A2 and A3 enhanced ratings reflect our current assessment of the Pennsylvania School District Intercept Program, which provides that state aid will be allocated to bondholders in the event that the school district cannot meet its scheduled debt service payments.

The district's A2 enhanced rating, which applies to its Series A of 2020, Series of 2020, Series of 2017, Series A of 2015, and Series of 2015 debt, reflects its direct-pay agreement with the commonwealth, in which the district has directed the treasurer of the commonwealth to automatically appropriate its state aid to the fiscal agent for the benefit of bondholders without any further notice required. For the Series A of 2020 bonds, the state has agreed to withhold a portion of the commonwealth appropriations due to the district on the last Thursday of the months of February and August of each fiscal year for the amounts due to bondholders on April 1 and October 1 - effectively two months in advance of payment. The Series of 2020, A of 2015, 2015, and 2017 carry similar provisions.

The A3 enhanced rating, which applies to the remainder of the district's rated parity debt, reflects the absence of language in the bond documents that requires the paying agent to trigger the state aid intercept prior to default. Nevertheless, the district has triggered the intercept on its non-fiscal agent enhanced debt in each of the last five fiscal years without issue.

As of audited 2019 financial statements, Penn Hill's School District's state aid revenue provides more than sum sufficient debt service coverage.

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 Penn Hills School District. 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 Penn Hills School District changes, we will update the rating and/or outlook at that time.

RATING OUTLOOK

The underlying rating outlook is stable. While we expect the district's liquidity position to remain weak with future years of operating deficits possible, we anticipate that our credit view will be stable at this highly speculative level in the near term.

The enhanced rating carries an outlook of stable, which mirrors the outlook of the Commonwealth of Pennsylvania (Aa3 stable).

FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATING

- Material improvement in the monthly cash flow position during the last four months of the fiscal year

- Sustained structural balance and stabilization of the district's overall operating position

- Improvement in the Commonwealth's rating, resulting in an upgrade to the Pennsylvania School District Intercept Program rating (enhanced)

FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATING

- Loss of market access for tax anticipation notes or long-term debt

- Prospect of a debt restructuring that would impose a loss on bondholders

- Inability to maintain district operations and programs leading to insolvency or overall reorganization

- Debt service coverage by state aid falling below sum sufficient due to increased district debt issuance (enhanced)

- Reduction of state aid to the district, which would reduce interceptable funds available and decrease coverage levels (enhanced)

- Decline in the Commonwealth's rating, resulting in a downgrade to the Pennsylvania School District Intercept Program rating (enhanced)

LEGAL SECURITY

All of the district's outstanding debt, including its General Obligation Bonds, Series A of 2020, are secured by its general obligation pledge.

The district's debt is further enhanced by the Pennsylvania School District Intercept Program. The intercept program is not a general obligation guarantee of the Commonwealth, and in fact, there have been times when the state has not distributed any aid to school districts, as was the case during the 2016 state budget impasse. However, with implementation of Act 85 in 2016, the state has ensured that intercept payments, for the benefit of bond debt service, will be made even in the absence of an appropriation budget.

USE OF PROCEEDS

Proceeds of the Series A of 2020 bonds will be used to refund the district's Series C of 2012 bonds for savings.

PROFILE

The district has a total population of 41,885 and provides K-12 education to approximately 3,300 students. It is located in the eastern central part of Allegheny County (Aa3 stable) in the southwest portion of the Commonwealth of Pennsylvania (Aa3 stable), approximately 9 miles east of downtown Pittsburgh (A1 stable).

METHODOLOGY

The principal methodology used in this rating was State Aid Intercept Programs and Financings published in December 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBM_1067422. 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.

The rating has been disclosed to the rated entity or its designated agent (s) and issued with no amendment resulting from that disclosure.

This rating is 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.

Gregory Sobel 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 Nicolanne Serrano 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

© 2020 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND/OR ITS CREDIT RATINGS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY'S (COLLECTIVELY, "PUBLICATIONS") MAY INCLUDE SUCH CURRENT OPINIONS. MOODY'S INVESTORS SERVICE DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE MOODY'S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY'S INVESTORS SERVICE CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS ("ASSESSMENTS"), AND OTHER OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY'S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY'S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

MOODY'S CREDIT RATINGS,ASSESSMENTS, OTHER OPINIONS, AND PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS OR PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.

ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT.

MOODY'S CREDIT RATINGS,ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.

All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided "AS IS" without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY'S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing its Publications.

To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY'S.

To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.

NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT RATING, ASSESSMENT, OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER.

Moody's Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody's Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody's Investors Service, Inc. have, prior to assignment of any credit rating, agreed to pay to Moody's Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. MCO and Moody's investors Service also maintain policies and procedures to address the independence of Moody's Investors Service credit ratings and credit rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody's Investors Service and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading "Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy."

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody's Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act 2001. MOODY'S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.

Additional terms for Japan only: Moody's Japan K.K. ("MJKK") is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody's Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody's SF Japan K.K. ("MSFJ") is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization ("NRSRO"). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY250,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

​​​​​​​​