LOS ANGELES -- Standard & Poor's Corp. yesterday said it has lowered its ratings on two series of Intermountain Power Agency crossover bonds, totaling $819 million, because of a reduction in the credit quality of a portion of investments in which the bond proceeds are held.
The downgrade, to AA-minus from AA, affects $408 million of special obligation bonds, first crossover series, and $411 million of special obligation bonds, fifth crossover series.
Standard & Poor's cited declining credit quality in certificates of deposit from Dai-Ichi Kangyo Bank Ltd. as a reason for the downgrade.
The proceeds of the crossover bonds are being held in various investments until July 1995, when they will be used either to refund existing power supply revenue bonds or to liquidate the special obligation bonds, the rating agency said.
In a crossover transaction, the proceeds of a new bond issue are placed in an escrow account while the issuer's revenues continue to pay debt service for a period of time on securities targeted for refunding. At a preset future date, the escrowed proceeds are released to refund the outstanding bond issue and the issuer's revenues "crossover" and begin paying off the new bonds.
Separately, Standard & Poor's said it affirmed its AA rating on Intermountain Power's $4.3 billion of uninsured power supply revenue bonds and $454 million of special obligation bonds, second crossover series.
The AA rating "reflects the continued strong financial performance and economic diversity of the California utilities that have contracted to purchase almost all of [the power agency's] capacity and [to] pay debt service on the power supply revenue bonds, along with the successful construction and operation of the 1600 megawatt coal-fired project," Standard & Poor's said.
The Intermountain Power generating station is located in west-central Utah. Standard & Poor's yesterday also affirmed its AAA rating on $70 million of special obligation bonds, second crossover series, and $290 million of special obligation bonds, fifth crossover series, because of various insurance policies.