CHICAGO — Moody’s Investors Service assigned an A1 rating to the Catholic Archdiocese of Chicago’s possible $151 million private placement of unsecured senior notes to repay loans and fund construction projects.

The archdiocese, established in 1843, solicited financing ideas from bankers last year and settled on a private placement, according to public finance sources. “We are contemplating alternative financing, one option of which is the proposed private placement,” said an archdiocese spokeswoman, who declined any further comment. “We are constrained by securities law from making any comment at all.”

If the archdiocese goes forward with the transaction, the notes would represent its only rated debt outstanding. Potential investors typically seek a public rating in such transactions.

The Catholic Bishop of Chicago, which oversees 357 parishes, would be the issuer and obligor. The notes would be placed with “a limited number of qualified institutional buyers and accredited investors,” according to the Moody’s report. The CBC would rely on the Archdiocese of Chicago Pastoral Center and the Catholic Cemeteries as the primary sources for repayment.

About $50 million of the proposed sale would refinance an existing loan, $25 million would repay a line of credit, and $42 million would go to reimburse capital expenses and fund construction of a seminary building and other projects.

O’Meara, Ferguson, Whelan & Conway Inc. is financial adviser. The credit was reviewed based on nonprofit criteria applied by Moody’s.

The rating is supported by the CBC’s status as one of the nation’s largest archdioceses, with 2.4 million members and the nation’s largest Catholic education system and cemetery system; its substantial balance sheet, strong governance and management practices; and a history of strong philanthropic support that is expected to continue with a new fundraising campaign.

The CBC’s senior leadership, headed by Cardinal Francis George, is also considered a positive credit factor, as is the Archdiocese’s financial oversight and reporting.

The CBC’s designated group benefits from a balance sheet with $380 million of expendable financial resources in fiscal 2011 and $885 million in assets under management. Canon law, which requires repayment of debt and obligations and prohibits default, is also a credit strength.

A history of clergy sexual misconduct claims and uncertainty over the fiscal impact of pending and future claims challenge the CBC’s new public rating. Modest operating cash flow and economic vulnerability that can negatively affect the Archdiocese’s assessments on parish collections and the sales of pre-burial services also pose challenges.

The Archdiocese self-insures for claims and officials told Moody’s they have adequately reserved for pending lawsuits.

“The rating outlook [of stable] could be pressured if the number of claims or the settlement amounts are greater than expectations and established reserves,” Moody’s wrote. q

The Archdiocese has paid out $103 million in settlements since 1986, although the amount paid each year has declined in recent years, including $9 million over the last two years. The archdiocese has pledged not to tap regular parish collections or its annual Catholic Appeal to cover the settlements and has relied primarily on property sales, insurance, and other funding sources.

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