Bond Rating
The City of Newport News maintains its infrastructure (buildings, streets, sewer systems, etc.) through the construction of capital projects. These projects are generally too large and expensive to be paid for within the confines of the annual operating budget. To pay for such projects, the City borrows money in the bond market, known as General Obligation Bonds. General Obligation Bonds are paid back over a period of twenty years, and the annual principal and interest payments, known as debt service, becomes a part of the annual operating budget. To borrow money in the bond market, the City must issue or sell bonds through a Bond Sale.
Most Recent Bond Activity – Series 2021A, B, & C Bonds and Water Revenue Bonds Series 2021
On February 25, 2021, the City’s Series 2021A General Obligation General Improvement Bonds were sold to Morgan Stanley & Co. LLC. The bonds have a 20-year life span with proceeds of $90.5 million to construct various capital projects, to include public buildings, streets, school renovations, and upgrade existing park facilities. The Series 2021A priced at a True Interest Cost (TIC) to the City of 1.79%.
The City’s Series 2021B Bonds were sold to Morgan Stanley & Co. LLC to refund certain outstanding general obligation bonds and general obligation water bonds of the City, and certain revenue bonds of the Economic Development Authority (EDA). The EDA bonds were issued for the benefit of the City and secured by a general obligation payment agreement of the City. The total combined refunding was equal to $61.4 million. The City undertook the refunding (also known as refinancing) of the eligible Bonds in order to reduce its annual debt service expenditures.
On June 3, 2021, the City’s Series 2021C Bonds were sold to Morgan Stanley & Co. LLC to refund certain outstanding general obligation bonds. The total refunding was equal to $19.5 million. The City undertook the refunding of these eligible Bonds in order to reduce its annual debt service expenditures.
The City’s Series 2021 Water Revenue Bonds were sold at a competitive sale on March 10, 2021 for $69.8 million to finance improvements for the renewal and replacement of capital assets, and the purchasing and installing of new equipment for the Newport News Waterworks water system. The bonds and the associated annual debt service are payable solely from revenues generated from Newport News Waterworks.
Credit Assessments and Bond Ratings
Moody's Investor's Service and Standard & Poor's Rating Services assigned credit/bond ratings after thorough reviews of the City's economic conditions, financial statements, and fiscal management policies. Formal credit/bond ratings are necessary to provide comparability and transparency so investors better understand the reasons for assigning various ratings.
Moody's Investor's Service assigned an Aa1 rating to the Series 2021 Bonds and affirmed the Aa1 rating on the City's previously issued General Obligation debt. Aa1 is the second highest rating Moody's assigns behind Aaa. Standard & Poor's Rating Services assigned an AA+ rating with a ‘stable outlook’ to the Series 2021 Bonds and also affirmed their AA+ rating on previously issued General Obligation debt. AA+ is also the second highest rating Standard & Poor's assigns behind AAA.
The City’s Waterworks Department is issued a separate bond rating through Moody’s Investor’s Service and Standard & Poor’s Rating Services. Moody's Investor's Service assigned an Aa1 rating to the Water Revenue Series 2021 Bonds and affirmed the Aa1 rating on Waterworks’ previously issued General Obligation debt. Aa1 is the second highest rating Moody's assigns behind Aaa. Standard & Poor's Rating Services assigned an AAA rating with a ‘stable outlook’ to the Water Revenue Series 2021 Bonds, and also affirmed their AAA rating on previously issued water revenue debt. AAA is the highest rating Standard & Poor's assigns.
What information is in the Bond Ratings Reports?
The February and March 2021 bond ratings reports from Moody's Investors Service and Standard and Poor's Ratings Services are available below. Other recent rating agency reports are also available below.