Press Release|Public Finance
KBRA Assigns AAA Rating to Oregon State Lottery Revenue Bonds, 2024 Series A - D; Affirms Rating for Parity Bonds
1 Apr 2024 | New York
KBRA assigns a long-term rating of AAA to the State of Oregon Department of Administrative Services: Oregon State Lottery Revenue Bonds, 2024 Series A (Tax-Exempt Projects & Refunding); Oregon State Lottery Revenue Bonds, 2024 Series B (Federally Taxable Projects); Oregon State Lottery Revenue Bonds, 2024 Series C (Tax-Exempt Refunding); and, Oregon State Lottery Revenue Bonds, 2024 Series D (Tax-Exempt Refunding). KBRA additionally affirms the long-term rating of AAA for parity Oregon State Lottery Revenue Bonds. The Outlook is Stable.
Key Credit Considerations
The rating actions reflect the following key credit considerations:
Credit Positives
- The Lottery enjoys statewide support as an essential resource, funding 6.1% of FY 2023 State General Fund expenditures. KBRA expects that the State would likely honor its moral obligation to replenish draws on debt service reserves, if necessary, given the essentiality of the Lottery to State operations.
- Pledged Revenues have proven resilient, including in 2020, when pandemic-related closures of bars and taverns led to periods with virtually no video lottery sales.
- Strong legal protections include the 4.0x ABT, debt service pre-funding mechanism, and availability of debt service reserves fully funded at aggregate MADs.
Credit Challenges
- Lottery sales are discretionary and economically sensitive in nature.
- Increasing competition for entertainment and gaming dollars, as well as changing generational preferences, may contribute to reduced Lottery revenues over the long term.
- The Lottery’s ability to attract new players is subject to external factors including demographics and hard to predict shifts in consumer entertainment preferences.
- The State has not approved expansion of the Lottery into mobile gaming, including betting on college sports, once considered a potential driver of future gaming revenue growth.
Rating Sensitivities
For Upgrade
- N/A
For Downgrade
- Sustained decline in Lottery sales that results in significantly diminished coverage of Lottery Revenue Bond debt service from unobligated net lottery proceeds.
To access rating and relevant documents, click here.