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“The review for possible downgrade of the Aa2 rating on the Chester Water Authority, PA’s Water Revenue Bonds reflects the uncertainty surrounding the fate of the bonds in light of their inclusion in the Chapter 9 bankruptcy Plan of Adjustment for the City of Chester. The plan contemplates the dissolution of the authority and the transfer of its assets, with the possibility that the authority’s debt would be assumed by an acquirer. Previously, our analysis had incorporated the prospect that in the event of a transfer or change in ownership of the authority’s assets, CWA’s debt would be defeased per state law, rather than assumed.”
“The rating also captures some of the risks and uncertainty surrounding the bankrupt City of Chester’s attempt to seize and monetize the authority’s assets. The Supreme Court of Pennsylvania is currently considering this case. Depending how this unfolds, it could have dramatic consequences for the authority’s rating. The longer this litigation drags on, the greater the risk CWA faces from potential market access limitations and other challenges relating to this controversy. The most drastic scenario would be one in which the City of Chester assumes the authority’s debt, even temporarily. In that event, the rating on the authority’s bonds could be downgraded many notches.”
Case #: 22-13032
Court: United States Bankruptcy Court – Eastern District of Pennsylvania
Debtor: City of Chester, Pennsylvania
We encourage ratepayers to visit the Donlin Recano website for real-time access to publicly available documents filed in the bankruptcy case.
