KBRA Affirms Ratings for Sales Tax Securitization Corporation Sales Tax Securitization Bonds (AAA) and Second Lien Sales Tax Securitization Lien Bonds (AA+)
22 Apr 2024 | New York
KBRA affirms the long-term rating of AAA for the Sales Tax Securitization Corporation Sales Tax Securitization Bonds. KBRA additionally affirms the long-term rating of AA+ for the Sales Tax Securitization Corporation Second Lien Sales Tax Securitization Bonds. The Outlook is Stable.
Key Credit Considerations
The rating affirmations reflect the following key credit considerations:
Credit Positives
- The combination of State law, the bankruptcy remoteness of the Corporation, the Sale Agreement, and the Indenture provide the Bonds with a strong legal framework that KBRA believes will insulate the pledged sales tax revenues and the Corporation from the operating and credit conditions of the City.
- The broad base of goods and services included in the pledged revenues combined with a long track record of collection and distribution mechanics provide for strong underlying asset characteristics.
- Additional bonds test of 4.0x on first lien and 1.75x combined first and second lien obligations prevents the Corporation from diluting the substantial cushion provided by the pledged revenues.
- Chicago’s deep, diverse, and resilient underlying economic base supports substantial residential and tourist retail activity.
- Strong projected coverage of monthly deposit and annual debt service requirements that withstand KBRA’s stress scenarios.
Credit Challenges
- The high overall sales tax rate in the City may adversely affect growth of the pledged sales tax revenues.
- Rating Sensitivities
For Upgrade
- N/A
For Downgrade
- A significant decline in pledged sales tax revenues that results in material weakening of debt service coverage ratios.
To access rating and relevant documents, click here.