Dec. 23 (Bloomberg) -- Philadelphia had its general-obligation debt rating raised two steps to A+ by Standard & Poor’s after three fiscal years of surpluses.
The rating company also gave a stable outlook and credited a state oversight board called the Pennsylvania Intergovernmental Cooperation Authority with the financial improvement of the nation’s fifth-most populous U.S. city. The municipality had $1.44 billion in general-obligation debt as of Oct. 31, according to bond-offering documents.
“The stable outlook reflects our view of the city’s strong budget performance due, in part, to oversight from PICA,” Hilary Sutton, a credit analyst, said today in a statement.
The new rating is S&P’s fifth-highest, and the highest the city has received from the company, which has now increased the grade three times in the past two and half years, Mayor Michael Nutter said in a statement.
“Philadelphians should know that in very practical terms, a higher bond rating means a lower cost of borrowing,” said Nutter, a 56-year-old Democrat.
Tax-exempt Philadelphia general-obligations maturing in August 2031 traded today at an average yield of 3.5 percent, or 2.84 percentage points over benchmark munis, wider than the average spread of 2.39 percentage points since June 30, data compiled by Bloomberg show.
S&P’s rating also applies to securities issued by the Philadelphia Redevelopment Authority, Philadelphia Authority for Industrial Development and Philadelphia Municipal Authority and supported by the city. There was about $3 billion of such debt as of Oct. 31, according to a municipal filing.
Moody’s Investors Service grades Philadelphia a step lower at A2 and Fitch Ratings two steps lower at A-.
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