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Spartanburg County School District 2, SC -- Moody's assigns Aa3 Und./Aa1 Enh. to Spartanburg CSD 2, SC's GO Bonds

·12 min read

Rating Action: Moody's assigns Aa3 Und./Aa1 Enh. to Spartanburg CSD 2, SC's GO BondsGlobal Credit Research - 07 Sep 2022New York, September 07, 2022 -- Moody's Investors Service assigns a Aa3 underlying rating and a Aa1 enhanced rating to Spartanburg County School District 2, SC's $20.0 million General Obligation Bonds, Series 2022. Moody's maintains a Aa3 issuer rating on the district and a Aa3 underlying rating on its outstanding general obligation unlimited tax (GOULT) bonds. The issuer rating reflects the district's ability to repay debt and debt-like obligations without consideration of any pledge, security, or structural features. Following the new issuance, the district's net direct debt will total approximately $133 million.RATINGS RATIONALEThe Aa3 issuer rating reflects the district's steady gains in enrollment and average resident income and wealth, supported by an expanding local economy. The rating also considers the solid and well managed financial position, which will remain stable relative to the district's growing budget. While the district's overall leverage is slightly elevated, this is largely due to pension and health care liabilities that are statutorily funded by the state.The Aa3 rating on the district's GOULT debt is at the same level as the issuer rating to reflect the district's full faith and credit pledge, as well as an unlimited property tax that is dedicated for debt service and levied upon all taxable property within the district. Additional security is provided by a lockbox structure under which Spartanburg County (Aa1 stable) performs property tax assessments, collects the district's debt service levy, holds sinking funds and makes debt service payments to the trustee.The Aa1 enhanced rating is based on the additional security provided by the South Carolina School District Credit Enhancement Program (SCSDCEP). As the SCSDCEP is a state-backed program, the enhanced rating is notched off the State of South Carolina's rating (Aaa stable).RATING OUTLOOKMoody's does not usually assign outlooks to local governments with this amount of debt.FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS- Material strengthening of resident income and wealth- Moderation of long-term liabilities- Significant and sustained growth in the financial positionFACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS- Material declines in reserves or liquidity- Large increases in total leverage and fixed costs- Deterioration of income and wealth levels- Downgrade of the South Carolina School District Credit Enhancement Program rating (enhanced rating only)LEGAL SECURITYThe general obligation bonds are backed by the district's full faith and credit pledge. The bonds also benefit from the presence of a dedicated property tax levy that is unlimited by rate or amount.Additional security is provided by the SCSDCEP, which enhances timely debt service payment through county and state government coordination and is backed by a sizeable annual state appropriation under the state's Aid to Classrooms program.USE OF PROCEEDSThe Series 2022 bonds will finance various capital projects, including classroom additions and expansions, maintenance of district facilities and technology upgrades.PROFILESpartanburg County School District 2 is one of seven districts in Spartanburg County. The district provides prekindergarten through twelfth grade education to 10,963 students as of fiscal year 2022. The district currently operates two high schools, three middle schools, and nine elementary schools.METHODOLOGYThe principal methodology used in the underlying rating was US K-12 Public School Districts Methodology published in January 2021 and available at https://ratings.moodys.com/api/rmc-documents/70054. The principal methodology used in the enhanced rating was State Aid Intercept Programs and Financings Methodology published in March 2022 and available at https://ratings.moodys.com/api/rmc-documents/356903. Alternatively, please see the Rating Methodologies page on https://ratings.moodys.com for a copy of these methodologies.REGULATORY DISCLOSURESFor 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 on https://ratings.moodys.com/rating-definitions.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 issuer/deal page for the respective issuer on https://ratings.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://ratings.moodys.com/documents/PBC_1288235.Please see https://ratings.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 issuer/deal page on https://ratings.moodys.com for additional regulatory disclosures for each credit rating. Jose Cavazos Lead Analyst REGIONAL_NE Moody's Investors Service, Inc. 7 World Trade Center 250 Greenwich Street New York 10007 JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Christopher Coviello Additional Contact REGIONAL_NE 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 © 2022 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 CREDIT RATINGS AFFILIATES ARE THEIR 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. 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