Moody's Investors Service has downgraded to A1 from Aa3 the Springfield School District 186, Ill.'s general obligation limited tax bonds.

Concurrently, Moody's has assigned an A1 rating to the district's general obligation limited tax refunding bonds, Series 2013A ($9.7 million) and Series 2013B ($24.1 million). Post-sale, the district holds $86.7 million of outstanding general obligation limited tax bonds, $82.9 million of which is rated by Moody's. The outlook is negative.

The Series 2013A and Series 2013B bonds are secured by the district's general obligation limited tax pledge, subject to the district's Debt  Service Extension Base (DSEB), which is limited as to amount but unlimited as to rate. Proceeds from the bonds will be used to refund certain maturities of the district's outstanding GOLT Bonds, Series 2010A for estimated present value savings.

The downgrade to A1 from Aa3 reflects the district's weakened financial position following five consecutive general fund operating deficits. The rating also incorporates the district's sizable tax base in downstate Illinois (GO rated A3/negative outlook), which benefits from the institutional presence of the state capital; below average socioeconomic profile; stable enrollment trends; and average debt burden with average principal amortization.

The negative outlook on the district reflects the local tax base and economy's dependence on the financial health of the state of Illinois, which is experiencing significant budgetary pressures, as well as the district's reliance on the state for state aid operating revenues and pension payments.

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