KBRA Affirms AA Rating with Stable Outlook for City of Chicago Second Lien Water Revenue Bonds

11 Apr 2024 | New York

KBRA affirms the long-term rating of AA with a Stable Outlook for the City of Chicago Second Lien Water Revenue Bonds.

The rating was affirmed because of the following key credit considerations:

Credit Positives

Large, diverse, and stable metropolitan Chicago customer base; high quality and reliable water source with substantial excess capacity.
Timely enactment of operational efficiencies by management that have resulted in a right-sizing of staffing levels and slowing of expense growth.
Excellent liquidity position.

Credit Challenges

Recent weakening in operating performance and debt service coverage attributable to rising operating costs.
Capital intensive operation necessitating on-going investment and debt issuance, though the recent introduction of pay-as-you-go financing is a moderating factor.
Narrow coverage and minimal anti-leveraging security protection under bond documents.

For Upgrade

Favorable progress in addressing infrastructure needs of the System, funded with a prudent mix of debt and non-debt sources.
Moderate declines in outstanding leverage through limiting future debt issuance and more rapidly amortizing outstanding debt.

For Downgrade

Unanticipated capital expenses significantly beyond what is projected in CIP.
Significant change in KBRA’s view of overall bill affordability, driven by material increases to existing fees and taxes, including the Utility Tax, and/or the imposition of new fees or taxes.

To access rating and relevant documents, click here.