WOONSOCKET – Fitch Ratings has upgraded Woonsocket’s Issuer Default Rating to BBB+ from BBB- and has raised the city’s outstanding series 2002 and 2005 general obligation bonds to A from BBB+.
Fitch also declared the city’s rating outlook remains positive.
The IDR rating was upgraded because of improved expenditure flexibility and positive general fund and school fund operations. Fitch said the city’s financial profile has stabilized, as demonstrated by positive operating margins for both the city and school department the past three fiscal years, improved liquidity levels and growth in the city’s tax base.
The general obligation bond rating at two notches above the city’s IDR is due to enhanced recovery prospects for GO bondholders afforded by a statutory lien on pledged property tax revenues. Fitch’s criteria for state and local government credits gives rating credit up to two notches above the IDR in limited circumstances in which Fitch believes there are distinct and superior prospects for ultimate recovery from a municipal bankruptcy.
The General Assembly enacted amendments to Section 45-12-1 of the General Laws to provide GO bondholders with a statutory lien on ad valorem taxes and general fund revenues of cities and towns with priority over creditors in the event of a bankruptcy of the issuer. Fitch believes this provides bondholders a substantial preferential right in a bankruptcy proceeding.
Mary Lhowe is a PBN contributing writer.
