Standard & Poor's Corp. last week said it may raise or lower its BBB rating on $160.4 million of lease revenue bonds for a resource recovery plant in Long Beach, depending on short- to intermediate-term developments.
The rating agency placed the rating on CreditWatch with developing implications for bonds issued in 1985 and 1986 by the Southeast Resource Recovery Facility Authority.
Standard & Poor's said the rating could be upgraded to the single-A category if Long Beach accepts the project, which would obligate the city to make lease payments sufficient to meet the authority's debt service payments.
Acceptance is tied to the receipt of a final "permit to operate" from the South Coast Air Quality Management District, which is expected by yearend.
"Negative rating possibilities still exist, however, due to heightened dependence on continued and reliable plant performance for debt service payments, questionable long-term project economics, and a more constrained financial situation," Standard & Poor's said.
"Failure to accept the project soon after the receipt of the permit could impair the authority's ability to make full and timely debt payments, and would likely result in a non-investment grade rating," the rating agency said.
Standard & Poor's downgraded the bonds to BBB from A-provisional two years ago, citing continued delays in the expected completion of the project.
Moody's Investors Service rates the debt conditional A.
