Back to Library » Finance » S&P Global Ratings Office Hours: COVID-19 & the Muni Bond Market
Caroline Koch

Water Policy Director, WaterNow Alliance.

Created: Thursday, June 11, 2020 | Updated: Thursday, June 11, 2020

Editors Note: This article was originally posted on WaterNow’s blog and is being reposted here with permission. It includes takeaways from S&P Global Rating’s recent Office Hours COVID-19 & the Municipal Bond Market on The Atlas.

S&P Global Ratings provides insight into key creditworthiness factors as public utilities navigate the current municipal bond market.

To say these are challenging times is an understatement. Impacts from the ongoing COVID-19 pandemic, and recent protests are crystalizing how systemic racial injustice and deep inequalities impact Black, brown and low-income communities. Ensuring access to clean, reliable water and wastewater services is a key dimension to addressing inequality across the country.

As local leaders, public water utilities, and community groups navigate these pressing issues, WaterNow is grateful to have hosted last week’s virtual office hours with Erin Boeke Burke, S&P Global Ratings’ Associate Director of Municipal and Cooperative Utilities together with our partners at The Atlas. The office hours discussion focused on local financing issues affecting decision-makers’ communities, and Erin answered questions about COVID-19 impacts on the municipal bond market, what these changes mean for utilities with existing debt and those considering issuing new bonds, and S&P Global Ratings creditworthiness factors.

Strong planning can go a long way to mitigate impacts of COVID-19 on creditworthiness.

My main takeaway: strong planning can go a long way. Utilities’ creditworthiness falls into two equally weighted categories—enterprise risk and financial risk.

Key risk factors for creditworthiness identified by S&P Global Ratings.
Key risk factors for creditworthiness identified by S&P Global Ratings.

These factors are designed to be forward-looking (info-gate to access link) anchored byS&P Global Ratings’ economic projections and rate to credit fundamentals as opposed to year-to-year volatility both financially and operationally.

Finances are only half of the picture.

In other words, finances are only half of the picture. The other half depends on a deep dive into a utility’s operations. Because creditworthiness factors are forward-looking, planning ahead for leaner times can help utilities position themselves to have continued access to bond markets. While Erin can’t provide advice given her role, she noted in particular that today’s market participants, including ratings agencies, are looking for heightened disclosures about the estimated impacts of COVID-19 and the recession in the short term and into the future. Having strong planning would foster utilities’ ability to meet this desire for additional information.

At this time of intense challenge WaterNow will work to highlight the connections between water justice, public utilities’ capital investments, and ratepayers, and continue to advocate for an equitable recovery in the water sector. Though equity was not the focus of the S&P Global Ratings virtual office hours, the discussion was part of this effort.

To read the discussion thread…

The full virtual S&P Global Ratings office hours discussion thread is available on The Atlas here. WaterNow members who have not yet activated their accounts on The Atlas can access the thread by resetting their passwords here, then clicking and following the pinned post on their homepage.

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