Fitch Ratings Removes Negative Watch for Reedy Creek Improvement District

The removal of the Rating Watch Negative reflects the enactment of legislation (House Bill 9-B) by the state of Florida that clarifies the future operational profile of the district, including the preservation of its existing revenue raising authority and other powers that allow for servicing of its debt obligations. The new law also re-ratifies and approves the district’s charter, confirms its status as a public corporation of the state, and replaces the current board with a new five-member board appointed by the governor and confirmed by the state senate, among other matters.

The ‘A’ rating and ‘a’ SCP reflect the district’s consistently very low financial leverage and very strong operating risk profile highlighted by a consistently very low cost burden. The rating also incorporates the district’s strong revenue defensibility, which is rooted in the provision of monopolistic utility services and autonomous rate setting, but is limited by the significant revenue and customer concentration of its largest customer, the Walt Disney Company (IDR A-/Stable). Disney’s operations consistently account for more than 80% of total utility system revenues.

The legislation’s requirement for a new board of directors free of ties to Disney should reduce governance risk. As such, Fitch is removing the asymmetric additional risk consideration associated with the current Disney-concentrated governance structure on the overall rating. The governor has proposed his nominations for the new board, the state senate is expected to deliberate and approve the new members by the end of the current legislative session. Fitch will monitor the district’s successful transition to the new board as well as ascertain its strategic direction and plans for maintaining consistent utility operations and strong credit quality moving forward.

Fitch has removed the ratings from Negative Watch and assigned a Stable Rating Outlook.

Share this post