CHICAGO – The Metropolitan Pier & Exposition Authority of Illinois absorbed a downgrade Tuesday, with its rating following the state government down.
S&P Global Services dropped Met Pier one notch to BBB from BBB-plus, following its downgrade of Illinois last week that brought the state to BBB-plus.
The outlook is negative.
The rating reflects a one notch distinction between the authority and the state based on appropriation risk. The authority has $2.7 billion of debt.
S&P downgraded Illinois Thursday ahead of a planned sale of $550 million of general obligation paper on June 16.
"We expect that even if the state fails to adopt a fiscal 2017 budget prior to its first monthly deposit coming due, triggering a second technical default, that the state would, much like it did in fiscal 2016, pass legislation appropriating funds for debt service prior to its Dec. 1 debt service date," analyst John Sugden said. The negative outlook reflects the outlook on Illinois.
Moody's Investors Service dropped the authority's bonds to Baa3 from Baa2 Wednesday, at the same time it downgraded the state to Baa2. Fitch Ratings also links the bonds off the state's rating due to appropriation risk. It affirmed the state at BBB-plus last week but put the credit on negative watch.
Before the state budget impasse took hold, the authority enjoyed a AAA rating from S&P and an AA-minus rating from Fitch. Both rating agencies dropped their rating to reflect state appropriation risk after a technical default.
The authority's bonds are backed by taxes on hotel stays, car rentals and other tourist services with statewide sales tax revenues allocated by statute to cover shortfalls between annual tourism tax revenues and debt service.
The lack of an appropriation without a state budget in place left the authority unable to make its July payment to the trustee to put toward a December debt service payment, creating a technical default.
Legislation signed by Gov. Bruce Rauner alleviated that problem and allows for all payments to be made in fiscal 2016. Moody's had already classified the credit as subject to appropriation risk and notched its rating off the state.
While the Republican governor and the General Assembly's Democratic majority remain locked in a budget impasse, the two sides are working on a stopgap budget plan. Rauner's proposal provides for the appropriation the authority needs to send tax revenue to the trustee.
