CHICAGO — The credit profile of some Illinois school districts that rely heavily on premium bond structures — where debt repayment is delayed or additional proceeds are raised upfront — may suffer, but Moody’s Investors Service said in a report yesterday that it doesn’t automatically view the use of such structures as a negative.
In a special commentary, the rating agency found that the state’s school district sector does not face immediate credit pressure from the use of premium bond structures — with a focus being on capital appreciation bond structures — with the type of bonds being just one of many factors analysts consider in their reviews. Those other factors include the strength of the pledged security, rate of principal amortization, total debt outstanding, debt structure, debt service as a percentage of a district’s expenses, tax growth rates, and financial flexibility.
