US credit downgrade cuts TVA bond rating
A major bond rating service has dropped its rating on nearly $20 billion of power bonds issued by the Tennessee Valley Authority due to the drop in the credit rating for the federal government as a whole.
Fitch Ratings Service, which last week downgraded the U.S. government’s credit rating, lowered its ratings on a number of identities that enjoy either the direct or implied backing of the U.S. government for their debt.
TVA, which is a federally owned corporation and America’s largest public utility, this week was downgraded a notch from AAA to AA-plus with a stable outlook. TVA’s debt is not formally government guaranteed, but ratings analysts base their rating in part on the expectation that the utility would likely receive federal support in the event of fiscal distress.
The downgrade was not driven by any TVA credit event, and the utility has no immediate plans to issue major bond issues, TVA spokesperson Scott Fiedler said. As a government-owned utility with the implied backing of Uncle Sam, TVA enjoys a lower cost of borrowing than do comparable investor-owned utilities.