MWRA bonds win AA+ Fitch rating ahead of May sale

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MWRA bonds Fitch AA+ rating

Highlights

Fitch assigns 'AA+' rating to MWRA's 2026 series C and D green bonds, scheduled for negotiated sale during the week of May 18.
MWRA projects annual rate revenue adjustments of 3.1% or less through fiscal 2031, while the five-year capital plan totals more than $1.99 billion (2024–2028), mostly debt-financed.
Fitch notes leverage falls to 6.5x in fiscal 2025 from 9.0x in 2020 and could decline to 6.2x over five years, supporting potential rating upgrades.

Rating action and credit strengths

As reported by Fitch Ratings, the agency assigns an 'AA+' rating to MWRA's 2026 series C and 2026 series D general revenue bonds, both designated as green bonds, and says the debt is scheduled to be sold through negotiation during the week of May 18.

The agency also affirms MWRA's outstanding Fitch-rated general revenue bonds at 'AA+', its subordinate general revenue bonds at 'AA', and its Issuer Default Rating at 'AA'. The Outlook on the IDR and subordinate general revenue refunding bonds is Positive, while the Outlook on senior lien general revenue bonds remains Stable.

Fitch says revenue defensibility is supported by the very strong credit quality of major purchasers, including Boston Water and Sewer Commission and the cities of Newton, Cambridge and Quincy, which together account for more than 40% of the authority's aggregate rates and charges. The agency also highlights contractual provisions that allow full cost recovery, unlimited reallocation of costs across users and the authority's legal ability to raise rates without outside approval.

Capital plan and regional utility impact

MWRA plans annual rate revenue adjustments of 3.1% or less through fiscal 2031, while Fitch describes the system's operating cost burden as very low at $3,410 per million gallons in fiscal 2025. The authority continues to expect most of its capital spending cap to be debt financed, with 5% funded on a pay-as-you-go basis.

The five-year spending cap totals more than $1.99 billion for fiscal years 2024 through 2028. Fitch says MWRA continues to monitor any U.S. Environmental Protection Agency developments tied to regulation of per- and polyfluoroalkyl substances in sludge and is currently in compliance with state and federal rules.

Fitch says leverage falls to 6.5x in fiscal 2025 from 9.0x in fiscal 2020 and is expected to decline to about 6.2x over the next five years. The agency adds that a continued favorable leverage trend could support positive rating movement for the subordinate general revenue bonds and the IDR. MWRA provides wholesale water and wastewater services to about 3 million people, or 44% of Massachusetts' population, primarily in eastern Massachusetts.

In our earlier coverage of Fitch’s rating on EnQuest PLC’s USD675 million senior unsecured notes due 2031, we outlined how the bond refinancing was intended to repay existing debt while also supporting liquidity with cash retained on the balance sheet. We also noted Fitch’s view that EnQuest’s small scale, high operating costs and decommissioning obligations are partly offset by moderate leverage, solid liquidity and gradually improving geographic diversification.

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