Housing Authority Of The County Of Butte, CA, 'A+' ICR Affirmed, Removed From CreditWatch

CENTENNIAL (S&P Global Ratings) March 14, 2019--S&P Global Ratings affirmed 
its 'A+' issuer credit rating (ICR) on the Housing Authority of the County of 
Butte (HACB), Calif. At the same time, we removed the rating from CreditWatch, 
where it had been placed with negative implications on Sept. 28, 2018 and 
later extended on Dec. 17, 2018. The outlook is negative.

The rating was originally placed on CreditWatch with negative implications on 
Sept. 28, 2018 (see our report on RatingsDirect) due to insufficient 
information related to the authority's unfunded pension liability and 
liquidity position, both of which we viewed to be material in reviewing and 
maintaining the rating. 

"In our opinion, the concerns about the authority's unfunded pension liability 
and liquidity position have been adequately addressed and we believe the 
authority has taken prudent and effective steps to mitigate the risk of credit 
quality deterioration related to these factors," said S&P Global Ratings 
credit analyst Joan Monaghan. 

The watch was extended on Dec. 17, 2018 (see our report) after the Camp Fire 
wildfire, which started in northern California on Nov. 8, 2018, destroyed over 
95% of the towns of Paradise and Concow and caused significant damage to the 
communities of Magalia, Pulga, Yankee Hill, and Butte Creek Canyon. HACB was 
also directly affected. 

HACB, located in Chico, is a nonprofit public agency incorporated in 1946. The 
authority serves more than 3,200 households in Butte and Glenn counties 
through a mix of rental assistance programs and affordable housing properties. 

The negative outlook is due to the extent of the negative effects of the Camp 
Fire on the authority being greatly unknown at this time. While we believe the 
authority has gone to great lengths to prepare for the worst and could come 
out of the disaster in a stable financial position, we believe there is a 
realistic, rather than remote, potential for negative rating action during the 
two-year outlook period.

Should the authority's financial position be materially affected through 
declines in HAP revenues and other stresses of the Camp Fire, as evidenced by 
declines in the EBITDA to revenues ratio, to the extent that performance is no 
longer in-line with the current rating, we could take negative rating action. 
Further, if HACB's liquidity assessment worsens to less-than-adequate as a 
result of the ratio dropping below 1.05x, from the current 1.20x, the rating 
will be capped at 'A-'. 

However, should the authority prove to be financially resilient and not 
realize material declines in key financial and profitability ratios from the 
effects and aftermath of the Camp Fire, we could revise the outlook to stable. 
Additionally, if HACB improves its profitability assessment by increasing 
EBITDA-to-revenues to over 20%, from the current 13%, while also improving its 
liquidity assessment, we could take positive rating action.