Credit-rating service assigns high ratings to McAllen ISD

A major credit-rating service has assigned high ratings to two McAllen ISD bond series following a recent review.   

Moody’s Investors Service assigned an Aa2 underlying rating and an Aaa enhanced rating to McAllen ISD’s $8.715 million Unlimited Tax Refunding Bonds, Series 2020A and $32.91 million Unlimited Tax Refunding Bonds, Taxable Series 2020B. 

A bond rating is a grade indicative of the bond’s credit-worthiness.

“Higher-rated bonds typically pay lower rates of interest so the district would benefit in the form of lower interest costs,” McAllen ISD Assistant Superintendent for Business Operations Cynthia Medrano-Richards, RTSBA, CPA, said. “Lower yields also indicate lower risk. Bond ratings are primarily based on the financial health and strength of the district and its capacity to meet financial commitments.”

Moody’s maintains the Aa2 underlying rating on the district’s outstanding general unlimited tax (GOULT) and general obligation limited tax (GOLT) debt.

The Aa2 rating “reflects the district’s strong financial position and relatively low, manageable debt and pension liabilities,” Moody’s wrote in a press release.

The Aaa enhanced rating is based on the rating of the Texas Permanent School Fund plus the structure and legal protections of the transaction which provide for timely payment by the PSF if necessary. 

The Moody’s press release also indicated that McAllen ISD is in a good financial position despite factors brought about by the COVID-19 outbreak.

“The coronavirus crisis is not a key driver for this rating action because of the district’s healthy reserves which mitigate unexpected costs for safety and technology equipment.”

The bonds are secured by a direct and continuing ad valorem tax levied by the district on all taxable property without limitation as to rate or amount. The bonds are further secured by the Texas Permanent School Fund’s commitment to pay debt service if necessary.

Proceeds from the sale of the bonds will be used to refund a portion of the district’s outstanding debt for debt service savings and for payment of the costs associated with the sale of the bonds.