RATINGS RATIONALE

The Aa1 rating is supported by the utility's large and growing service area that spans a multi-county portion of the Greenville (Aaa stable) metropolitan area, very healthy liquidity, unlimited rate setting authority, prudent financial management and a modest debt burden. Balanced against these strengths is the utility's debt service coverage that, while sound, is below similarly rated sewer utilities. Additionally, the utility has a relatively high reliance on new account fees, which have been growing in recent years but can be volatile and somewhat unpredictable.

We regard the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety. The coronavirus crisis is not a key driver for this rating action. We do not see any material immediate credit risks for the utility. However, the situation surrounding Coronavirus is rapidly evolving and the longer term impact will depend on both the severity and duration of the crisis. If our view of the credit quality of the utility changes, we will update the rating and/or outlook at that time.

RATING OUTLOOK

The stable outlook reflects our expectation that the utility's financial position will remain in line with the Aa1 rating category over the next 12 to 18 months.

FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS

- Improvement in debt service coverage to a level consistent with the Aaa rating category

- Moderation in reliance on new account fees

FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS

- Deterioration in debt service coverage or liquidity

- Significant increase in debt burden

LEGAL SECURITY

The Series 2020 bonds are secured by a pledge of and lien on the utility's net revenues. The pledge and lien are junior and subordinate to the pledge and lien securing the utility's senior lien bonds (Series 2005B). The utility's senior lien is closed. The outstanding senior lien bonds comprise just 4% of the utility's total outstanding debt and are scheduled to fully mature in March 2021. As such, we rate the utility's junior and senior lien debt at the same level.

USE OF PROCEEDS

The Series 2020 bonds are being issued to refund several series of outstanding parity revenue bonds for interest savings.

PROFILE

Renewable Water Resources is a special purpose district and political subdivision of the State of South Carolina that was originally created by the General Assembly in 1925. ReWa is the largest provider of sewer collection and treatment in the Greenville region, and services residents within Greenville (Aaa stable), Laurens, Pickens (Aa2) and Spartanburg (Aa1 stable) counties. The system is governed by an 11-member commission that is appointed by the governor. The commission approves all operating policies, annual budgets, capital improvements, rates and charges of the utility. At the end of 2019, the utility had 141,708 accounts.