WASTE BUSINESS JOURNAL: Moody’s investor service may be throwing a monkey wrench into Lancaster County Solid Waste Management Authority’s (LCSWMA) plans to buy the troubled Harrisburg, PA incinerator. While affirming its A3 rating of the LCSWMA’s $30.6 million of debt, Moody’s said the acquisition could result in a “multiple-notch rating change.” LCSWMA, beginning in Mar. 2011, has offered to buy the Harrisburg plant which has been at the heart of the City of Harrisburg’s financial woes that include $340 million in debt. The Moody’s report goes on to caution that “Given the history of this particular asset, the undertaking by the authority may be credit negative in our view.” James Warner, CEO of the LCSWMA, expressed dismay, saying that Moody’s had overstepped. “When they say multiple-notch rating change, we can only assume a negative one,” he said. “This was really an ordinary surveillance update, so we were surprised by this. They wanted to know about this deal. We discussed it but really we didn’t think it should factor into their upgrade.” A multiple notch downgrade could put LCSWMA’s debt on the edge of “non-investment grade,” resulting in more difficulty obtaining funding and higher interest rates. Nevertheless, Warner said that they are moving forward with the deal and he hopes to be in there by the end of the second quarter.
Standard & Poor’s rates the Lancaster bonds AA-minus, also stable, having last affirmed that rating in November 2009. “Moody’s has us three notches below S&P. That’s a big gap,” Warner said. “There is no doubt the bond industry has this bias against anything regarding the Harrisburg plant. But that facility is running quite well, thanks to the expertise of Covanta Energy.” Covanta finished the project after taking over its operations in 2007.
LCSWMA’s offer proposes to solve two problems, avoid having to expand its own incinerator for $175 million, and provide the City of Harrisburg cash needed to reduce its massive debt which has it teetering on bankruptcy. LCSWMA initially offered $45 million along with a promise to upgrade the plant but later increased it to $124 million if the city and Dauphin County would guarantee the waste. William Lynch, the city’s state-appointed receiver, is selling the incinerator, water and wastewater systems and parking garages. Last June, Lynch’s office selected LCSWMA to negotiate exclusively for the incinerator… (more)
EDITOR: When will the Lancaster Newspapers investigate and ask questions about the dubious acquisition of the Harrisburg Incinerator. Or are they too busy covering local sports and crime?
