S&P places Oregon city, school district on CreditWatch

BY SourceMedia | MUNICIPAL | 09/17/20 09:56 AM EDT By Keeley Webster

An Oregon city and school district ravaged by the fires that have consumed more than 1 million acres across the state had their ratings placed on CreditWatch with negative implications by S&P Global Ratings Wednesday.

The issuers involved were Phoenix, Oregon, which holds an AA-minus rating from S&P, and Phoenix-Talent School District No. 4, which serves students in Jackson County, and has an A-plus underlying rating.

Marc Joffe, a senior policy analyst with the Reason Foundation, had anticipated the school district might face debt challenges in comments made to The Bond Buyer for a previous article. Joffe noted it had issued $68 million of general obligation bonds in 2018.

"Fortunately for bond holders, bonds (issued by school districts) are enhanced through a state guarantee program," he said.

The Almeda Drive Fire that burned between the larger towns of Medford and Ashland devastated Phoenix, population 4,538, and Talent, population 6,066, was pronounced 100% contained by fire officials Tuesday. The Rogue Valley fire resulted in the loss of 2,350 homes and three deaths.

S&P analysts wrote the CreditWatch actions reflect their view that the Almeda Drive Fire ?could weaken these entities? ability to meet their obligations given now realized environmental risks associated with natural conditions and wildfires stemming from climate change.?

?We view the damage and potential revenue and expenditure disruption in these communities as creating an at least one-in-two chance of weakening credit quality,? S&P wrote.

As of Wednesday night, more than 27 fires continued to burn across the state, though fire officials were hopeful, with rain forecast for the end of the week.

S&P broadly opined, the fires burning in Oregon, California and Washington could mean elevated environmental risks leading to operational disruptions, infrastructure and facility damage, or major economic losses, which could change S&P?s view of the credit quality.

?We expect information regarding the effects of the fire to materialize in the coming weeks, and we anticipate resolving the CreditWatch listing in the next 90 days as the implications of the damage become better known,? S&P wrote.

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Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

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