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This ought to be a wake-up call to Texas lawmakers who have a fiduciary duty to rein-in Texas Governor Rick Perry's debt spiral. How long will it be before Texas' credit rating on its outstanding gas tax backed bonds go south? Especially since lawmakers are draining the state's Rainy Day Fund?
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Press release
Business Wire
June 4, 2013
Fitch Downgrades Chicago, IL's Motor Fuel Tax Bonds to 'BBB+'; Outlook Negative
NEW YORK, Jun 04, 2013 (BUSINESS WIRE) -- -Fitch Ratings has downgraded to 'BBB+' from 'A-' the rating on the following Chicago, IL motor fuel tax bonds:
--Approximately $101 million motor fuel tax revenue TIFIA bond (wacker drive reconstruction project - including the chicago riverwalk expansion:TIFIA 2013-1004A);
--$103.6 million motor fuel tax revenue refunding bonds, series 2013;
--$114.4 million motor fuel tax revenue bonds, series 2003A;
--$62.9 million motor fuel tax revenue bonds, series 2008A;
--$3.7 million motor fuel tax revenue bonds, series 2008B.
The rating action was triggered by the downgrade of the State of Illinois' general obligation (GO) rating to 'A-' from 'A'.
The rating is removed from Rating Watch Negative. The Rating Outlook is Negative.
SECURITY
The bonds are secured by a first lien on all motor fuel taxes distributed to the city by the state, subject to annual appropriation by the state legislature. Additionally, various project-related revenues are pledged.
KEY RATING DRIVERS
STATE RATING DOWNGRADE: The downgrade was triggered by Fitch's downgrade of the state of Illinois' GO bond rating to 'A-' from 'A'. The rating on the fuel tax bonds is limited by the state's credit quality. Motor fuel tax revenues are distributed according to a formula controlled by the state and are subject to annual appropriation by the state. Therefore, the rating on these bonds is capped at one notch below the state's GO rating.
SOLE RELIANCE ON FUEL TAX REVENUES: The rating assumes no support from the additionally pledged revenues, given the difficulty in assessing the new revenue stream. It therefore relies solely on the motor fuel tax revenue stream.
ADEQUATE COVERAGE: Fitch base case projections indicate maximum annual debt service coverage at or above 1.3x, assuming modest annual declines in motor fuel tax revenues.
NEGATIVE OUTLOOK TIED TO STATE'S RATING: The Negative Outlook results from Fitch's Negative Outlook on the state of Illinois' GO bond rating.
RATING SENSITIVITIES
STATE CREDIT QUALITY: The rating is sensitive to a downgrade in the state's GO rating (currently 'A-', Rating Outlook Negative). A downgrade of the state's GO rating would result in a downgrade of these bonds.
CREDIT PROFILE
For details on the city's motor fuel tax bonds see 'Fitch Rates Chicago, IL Motor Fuel Tax Bonds 'A-'; Ratings on Negative Watch' (May 24, 2013), available at www.fitchratings.com.
For more information on the state see 'Fitch Downgrades Illinois' GO Rating to 'A-'; Outlook Negative' (June 3, 2013), available at www.fitchratings.com.
Additional information is available at 'www.fitchratings.com'.