OREANDA-NEWS. S&P Global Ratings lowered its long-term rating on the City of Cedartown, Ga.'s series 2013 water and sewer revenue bonds outstanding to 'A' from 'A+'. The outlook is stable.

"The downgrade reflects the application of our revised criteria on municipal waters and sanitary sewer utility revenue bonds," said S&P Global Ratings credit analyst Scott Winrow.

(See "Rating Methodology And Assumptions For U. S. Municipal Waterworks And Sanitary Sewer Utility Revenue Bonds," published Jan. 19, 2016, on RatingsDirect.)

In addition, the rating reflects, in our opinion, the combination of a strong enterprise risk profile and a strong financial risk profile.

The enterprise risk profile reflects our view of the system's:Stable, diverse customer base, with below-average income indicators; Very low industry risk associated with public water and sewer service;Moderately affordable rates representing 2.2% of median household income; andGood operational management policies and practicesThe financial risk profile reflects our view of the system's:Strong-to-good historical all-in debt service coverage (DSC);Very strong liquidity position that we believe is sustainable given the system's manageable capital needs;Moderate leverage based on a debt-to-capitalization of about 39%, with no additional debt plans in the near term; andGood financial management policies and practices. The water and sewer system's net revenues secure the bonds. We believe bond provisions are fairly typical for similar transactions. They include a 1.10x rate covenant, a debt service reserve funded to the standard IRS maximum, and an additional bonds test requiring historical net revenues to cover pro forma maximum annual debt service by 1.2x, or 1.3x with an ability to retroactively apply rate increases.

We expect the outlook to remain stable over the two-year outlook period. We also expect the system to maintain all-in DSC at levels we consider generally strong and cash levels we consider strong.

Given these expectations and the size of the system, we do not expect to raise the rating during our outlook's two-year horizon. However, if the system strengthens financial metrics, specifically all-in DSC, to levels we consider extremely strong, we could consider raising the rating.

Conversely should financial metrics erode materially from current levels, we may consider a lower rating.