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Walled Lake Consolidated School District, MI -- Moody's assigns UND A1 & ENH Aa1 to Walled Lake Consolidated School District, MI's GO Bonds

·13 min read

Rating Action: Moody's assigns UND A1 & ENH Aa1 to Walled Lake Consolidated School District, MI's GO Bonds

Global Credit Research - 08 Jan 2021

New York, January 08, 2021 -- Moody's Investors Service assigns an underlying A1 rating and an enhanced Aa1 rating to Walled Lake Consolidated School District, MI's $70 million 2021 Refunding Bonds (Unlimited Tax General Obligation) (Federally Taxable). Moody's maintains an underlying A1 rating on the district's outstanding General Obligation Unlimited Tax (GOULT) debt. Following the sale, the district will have about $294 million in outstanding GOULT debt.

RATINGS RATIONALE

The underlying A1 GOULT rating reflects the district's large tax base with above average resident income levels, limited reserves, declining enrollment trend, growing though moderate debt burden and above average pension burden.

The enhanced rating on the current bonds reflects the additional security provided by the Michigan School Bond Qualification and Loan Program (SBQLP). The Aa1 programmatic rating mirrors the State of Michigan's Aa1 general obligation unlimited tax (GOULT) rating and the enhancement program carries a stable outlook, reflecting the stable outlook on the State of Michigan. Under the program, the state has a constitutional obligation to provide a school district with sufficient funds to make timely debt service payments, if necessary. Fundamental to the Aa1 rating are the program's sound mechanics to ensure timely payments, which include a provision for independent third-party notification to the state in the event of debt service insufficiency, and the strength of the state's general obligations.

RATING OUTLOOK

Outlooks are typically not assigned to underlying ratings of local governments with this amount of debt.

FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS

-Significant and sustained increases to fund balance

-Reduced debt and pension burden

FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS

-Further narrowing of reserves or liquidity

-Increased pension burden, or higher than anticipated increase in district's debt burden

LEGAL SECURITY

The district's GOULT bonds are secured by the district's pledge and authorization to levy a dedicated property tax unlimited as to rate and amount.

The district's GOULT bonds are additionally secured by the State of Michigan's School Bond Qualification and Loan Program (SBQLP), which is the basis for the enhanced rating. The bonds were authorized by voters in a qualified election and state's Department of Treasury is expected to grant final qualification upon the sale of the bonds.

USE OF PROCEEDS

The 2021 Refunding Bonds will refund the district's outstanding 2011 Refunding Bonds and the district's outstanding 2014 School Building and Site Bonds. The 2011 bonds were originally issued to refund the district's 2001 refunding bonds which had advanced refunded the district's 1996 School Building and Site Bonds. The 2014 bonds were originally issued to finance a series of upgrades and equipment purchases for several of the district's facilities.

PROFILE

Walled Lake Consolidated School District is in western Oakland County (Aaa stable) and encompasses 55 square miles. The district serves several communities including all of the City of Walled Lake and portions of the cities of Farmington Hills (Aa1), Novi, Orchard Lake Village and Wixom (Aa2) and the Townships of Commerce Charter (Aaa), West Bloomfield and White Lake and the Village of Wolverine Lake. The district's population exceeds 100,000 residents and the unaudited fiscal 2021 fall enrollment count totaled about 12,690 students.

METHODOLOGY

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

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_1243406.

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.

Benjamin VanMetre Lead Analyst Regional PFG Chicago Moody's Investors Service, Inc. 100 N Riverside Plaza Suite 2220 Chicago 60606 US JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Tatiana Killen Additional Contact PF General Administration 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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