Aquilla Wtr Supply Dist,TX's Bnds Rtd BBB by S&P.

NEW YORK--(BUSINESS WIRE)--Standard & Poor's CreditWire 9/23/98-- Standard & Poor's today assigned its triple-'B' rating to Aquilla Water Supply District, Texas' contract revenue refunding bonds series 1998 issued for Hillsboro, Texas.

The triple-'B' rating on Aquilla Water Supply District's bonds reflects:

-- Underlying credit characteristics of the largest participant, the city of Hillsboro;

-- The participants' contractual obligation to make unconditional payments for debt service on the bonds from operating revenues; and

-- An unlimited step-up provision in case of default. Bond proceeds will be used to refund the district's 1990 senior lien contract revenue bonds.

The bonds have a first lien and are senior to 1996 junior lien bonds. The district purchases raw water from the Brazos River Authority, treats the water at its recently expanded treatment plant and sells the treated water to six wholesale customers: the city of Hillsboro and five water supply corporations. Contracts with the six purchasers, which include an unlimited step-up provision in case of default, are in effect until 2033 or until all debt obligations have been paid. Purchasers make unconditional payments based on their contractual raw water amounts and actual annual usage.

The city of Hillsboro, located 30 miles north of Waco on Interstate Highway 35, is responsible for 75% of the payments made to the district which supplies all of the city's water. The city's system serves approximately 3,458 connections, which have grown 19% in the past five years and steady growth is expected to continue. The city purchases water from the district and has sufficient capacity for growth, since the peak usage in 1997 was only 69% of its contractual amount with the district.

Hillsboro's rates are above average at $57.00 for a combined 10,000 gallon bill, although no increases are anticipated. The customer base is concentrated with the top 10 users accounting for 22% of revenues. This reflects the presence of Campbell's Fresh Inc. in the city, a mushroom grower, which accounts for 11.5% of total water usage.

The city has no outstanding revenue obligations, although it pays a portion of its general obligation debt from system revenues. Fixed charge coverage of the payment made to Aquilla and the general obligation debt paid from revenues was 1.38x in 1997. No additional debt issuance is anticipated and capital needs are minimal for the system.

OUTLOOK: STABLE

The outlook reflects the sufficient capacity of the district to meet the growth needs of its wholesale customers and the adequate financial position of Hillsboro to meet unconditional contractual payments to the district. -- CreditWire