KBRA Assigns AA Rating to The Metropolitan Government of Nashville and Davidson County (TN) Water and Sewer Revenue Refunding and Improvement Bonds, Series 2025; Affirms WIFIA Loan Rating at AA

KBRA assigns a long-term rating of AA to the Metropolitan Government of Nashville and Davidson County's (TN; the "Metropolitan Government") Water and Sewer Revenue Refunding and Improvement Bonds, Series 2025. Additionally, KBRA affirms the long-term rating of AA for the Metropolitan Government's Water and Sewer System WIFIA Loan for Process Advancements at Omohundro and K.R. Harrington Water Treatment Plant Projects (WIFIA ID - N20115TN). The rating outlook is Stable.

Key Credit Considerations

The rating was assigned/affirmed because of the following key considerations:

Credit Positives

• Providing essential services with rate setting autonomy. Demonstrated willingness to increase rates on an annual basis since fiscal 2020, to meet operating and capital requirements.
• Strong financial performance supported by fiscally sound financial and rate plans, with ample cash flow, liquidity, and debt service coverage. Rates remain competitive, maintaining rate flexibility going forward.
• Strong service area demographics, encompassing the rapidly growing City of Nashville, with above average income and employment levels.

Credit Challenges

• Managing the substantial capital plan and the potential for unanticipated capex cost increases through 2029.
• Significant debt requirements to fund the capex ($1.3 billion) may pressure leverage higher over the five-year horizon.

Rating Sensitivities

For Upgrade

• Substantial fulfillment of Consent Decree and ongoing capex requirements accompanied by the maintenance of moderate or reduced leverage and affordable rates.

For Downgrade

• Material escalation of the Consent Decree and other capital program costs to a level placing significant pressure on rate affordability and/or leverage.
• Inability to adjust rates as needed and on a timely basis to manage the systems’ operating and capital needs while maintaining moderate leverage.

To access ratings and relevant documents, click here.

Methodologies

• Public Finance: U.S. Municipal Retail Utility Revenue Bond Rating Methodology
• ESG Global Rating Methodology

Disclosures

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA), one of the major credit rating agencies (CRA), is a full-service CRA registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a Designated Rating Organization (DRO) by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized as a Qualified Rating Agency by Taiwan’s Financial Supervisory Commission and is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider (CRP) in the U.S.

Doc ID: 1009508

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