Standard & Poor's Ratings Services has lowered to 'BBB+' from 'AA+' its ratings on Chicago, Ill.'s motor fuel tax (MFT) revenue series 2008 and 2013 bonds and Transportation Infrastructure Finance and Innovation Act (TIFIA) drawdown loan. We also placed the ratings on CreditWatch with negative implications.
The downgrade reflects our view that near-term debt service payments on the series 2008 and 2013 bonds and the TIFIA drawdown loan are reliant on the ability and willingness of the city to make payments from funds on hand. Prior to this point, the ratings had been based on the strength of the flow of MFT revenues from the state of Illinois to the city. However, a budget impasse at the state is obstructing the disbursement of the MFT revenues to the city; Chicago has not received monthly MFT revenues from the state since August, 2015. The MFT revenues are pledged to pay debt service for the series 2008 and 2013 bonds, as well as the TIFIA drawdown loan.
The CreditWatch negative reflects the risk that the flow of MFT revenues may not be resumed in the next 90 days. A resumption of MFT revenue distributions from the state would lead to removal of the CreditWatch negative placement. However, if the city's currently available MFT revenues are exhausted, and the MFT revenue distributions from the state have not resumed, there could be further credit degradation on the ratings.
