Abstract
This paper traces the history of the Washington Public Power Supply System (WPPSS) Projects 4 and 5 bond default, and evaluates Moody's ratings of the bonds in light of the facts available at the time, utilizing among other things a database and a ratings model developed for 1977 based on Moody's own statements as to what variables are important in its ratings determinations. The model is reasonably successful in replicating Moody's 1977 ratings generally, although many of the variables described as important by Moody's turn out to be insignificant statistically. When the model is applied to WPPSS 4 and 5 participant utilities, it becomes evident that the System's 1977 bonds should have been given a below-investment grade rating consistent with Moody's model-revealed standards. The paper concludes with a 1981 model update and some conjectures as to why the misratings occurred, as well as why the bonds could ever have been sold to the public.
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