The flood closed businesses on the famous Los Angeles street and turned daily life upside down for more than a week.
The utility behind the pipe is the Los Angeles Department of Water and Power, the biggest city-run utility in the United States.
Those bonds are basically the city borrowing today against the water bills it expects to collect tomorrow. The proceeds are part of a wider infrastructure effort, with the utility earmarking over $10 billion between now and fiscal 2031 for replacing and repairing old pipes and equipment.
One of those repairs was already on the books.
The trunk line is not just any pipe. It is a major water route that carries reservoir water to neighborhoods, so when it breaks, a lot of people notice.
More than 30% of LADWP's main water lines are over 80 years old. The utility also says its leak rate per mile is below the national average, so the system is aging but not crumbling.
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Age is the reason the repair bill is so big. The utility serves 740,000 water customers, and that steady stream of payments gives it financial muscle, even with all those old pipes.
The old pipes are not the only thing weighing on these bonds.
Plaintiffs say a reservoir was left empty, leaving firefighters without enough water to battle the fire, and other lawsuits claim LADWP failed to de-energize power lines, which sparked more fires. The utility denies wrongdoing and is contesting the cases.
The litigation has already made an impact: Moody's rated the new bonds Aa3, and Fitch gave them AA- in July with a stable outlook.
Moody's praised the utility's "exceptionally large and stable customer base" before adding a warning. "Significant increases in costs from any liability could crowd out necessary capital spending or strain rate increases and therefore financial flexibility over the long term," the agency said.
Fitch made its own point about the ceiling. It said a higher rating is unlikely until the wildfire lawsuits are resolved.
A credit rating is a simple idea: it is a score on how likely a borrower is to pay you back. Aa3 and AA- are solid scores, and they tend to attract investors who want steady income.
The catch: the rating agencies have both pointed at the same risk. If the lawsuits force big payouts, LADWP might have to scale back pipe repairs, push water rates higher, or both.
If bonds like these are in your portfolio, that is where the uncertainty lives. For people in LA, it is more personal.
The water that comes out of an LA tap runs through pipes like the one that burst in July. Most days, nobody gives those pipes a second thought, and then one floods a famous street.
The bond sale is the easy part. It gives LADWP cash to start fixing what it already knows is broken, but the future depends on lawsuits that are nowhere near finished.
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