Rating Action: Moody's assigns A1 enhanced rating to Robertson County School District, KY's $775,000 lease revenue bonds
Global Credit Research - 27 Aug 2020
New York, August 27, 2020 -- Moody's Investors Service has assigned an A1 enhanced rating to Robertson County School District, KY's $775,000 School Building Revenue Bonds, Series 2020B, issued through the Robertson County School District Finance Corporation, KY.
The A1 enhanced rating is based on the Kentucky School District Enhancement Program, which carries an A1 rating with a stable outlook. The program rating is available to all Kentucky school districts and the rating and outlook shadow the Commonwealth of Kentucky, which is currently rated Aa3 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 for Robertson County 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 the district changes, we will update the rating and/or outlook at that time.
The school district currently does not have an underlying rating. Thus, we have no assigned outlook. The Kentucky School District Enhancement Program that the rating is based on has a stable outlook.
FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATING
- An upgrade of the Commonwealth of Kentucky's long term issuer rating
FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATING
- Downgrade of the Commonwealth of Kentucky's long-term issuer rating
- Weakening of the program's notification and timing provisions or of the state Department of Education's ("KY DOE") oversight
The bonds are secured by annual rental payments by the district to the corporation from the leasing of the project. Rental payments from the district are subject to annual appropriation and the lease automatically renews, unless the district provides notice of termination 90 days prior to the automatic renewal date (July 1). The portion of annual rental payments equal to debt service on the bonds and notes is forwarded directly to the paying agent at least 10 days prior to debt service due dates.
The mechanics of the enhancement program direct the paying agent to notify the KY DOE if payment of principal or interest has not been received three days prior to the date on which the debt service payment is due. Upon notification by the paying agent, the KY DOE must forward, from available funds, the amount due to the paying agent.
KY DOE's strong oversight and willingness to exercise its powers mitigates the risk of non-appropriation. All school district budgets are subject to annual approval by the KY DOE. Additionally, KY DOE is authorized to disapprove a budget if it is financially unsound or fails to provide for debt service, payment of rentals in connection with debt service, or otherwise to comply with the law. A lease's nonrenewal or default would likely result in a takeover of the school's fiscal management and/or removal of the elected school board. KY DOE has a record of taking over the management of school districts that face deficit operations.
USE OF PROCEEDS
Proceeds will be used to finance improvements at Robertson County School.
Robertson County School District is located in the Bluegrass Region of Kentucky, approximately 52 miles northeast of Lexington-Fayette Urban County Government, KY (general obligation Aa2 stable). The district had average daily attendance of 375 for the 2018-19 school year, which represents a 8.4% growth from the prior school year. The Robertson County School District Finance Corporation, issuer of the Series 2020B bonds, is a non-profit corporation created by the district pursuant to Kentucky Revised Statute 162.385 to act as a municipal corporation and agency and instrumentality of the board.
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.
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.
Taruna Manni 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 Douglas Goldmacher 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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