TEXT-Fitch puts Chicago Motor Fuel Tax bonds on negative watch

Fri Feb 1, 2013 6:00pm EST

Related Topics

Feb 1 - Fitch Ratings has placed the 'A-' rating on the following Chicago,
IL Motor Fuel Tax bonds on Negative Watch:

--$114.4 million motor fuel tax revenue bonds, series 2003A;
--$62.9 million motor fuel tax revenue bonds, series 2008A;
--$3.7 million motor fuel tax revenue bonds, series 2008B.

The rating action was triggered by the placement of the State of Illinois'
general obligation (GO) rating on Rating Watch Negative.

SECURITY

The bonds are secured by a first lien on all motor fuel taxes distributed to the
city by the state, subject to annual appropriation by the state legislature.

SENSITIVITY/RATING DRIVERS

STATE RATINGS PLACED ON NEGATIVE WATCH: The Negative Watch results from Fitch's'
placement of the state of Illinois' general obligation rating on Negative Watch.

PLEDGED REVENUES VULNERABLE TO STATE: Revenues are distributed according to a
formula controlled by the state and are subject to annual appropriation by the
state. Therefore, the rating on these bonds is capped at one notch below the
state's GO rating.

STRONG COVERAGE BY PLEDGED REVENUES: Historical coverage of motor fuel tax debt
service by pledged revenues has been strong.

WHAT COULD TRIGGER A RATING ACTION

CHANGE IN STATE RATING: A downgrade in the state's GO rating would result in a
downgrade of these bonds.

CREDIT PROFILE

REVENUES VULNERABLE TO STATE; RATING CAPPED BY STATE RATING
Motor fuel tax revenues are collected by the state and local distributions are
subject to annual appropriation by the state legislature. In addition, the state
has the ability to alter the distribution formula or identify more priority
allocations, as distribution of the motor fuel tax revenues only occurs net of
these prior allocations. As a result, the rating on the bonds is capped at one
notch below the GO rating of the state.

Fitch notes debt service coverage on the city's motor fuel tax bonds has
historically been very strong and well in excess of the 2x additional bonds
test. Pledged revenues covered motor fuel tax debt service by 3.4x in 2011.

For more information on the state see 'Fitch Places Illinois GO Bonds on Rating
Watch Negative' (Jan. 11, 2013), available at www.fitchratings.com.

Additional information is available at 'www.fitchratings.com'. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.

Applicable Criteria and Related Research:
--'Tax-Supported Rating Criteria' (Aug. 14, 2012);
--'U.S. Local Government Tax-Supported Rating Criteria' (Aug. 14, 2012).
--'U.S. State Government Tax-Supported Rating Criteria', (Aug. 14, 2012).
--'Fitch Places Illinois GO Bonds on Rating Watch Negative', (Jan. 11, 2013).

Applicable Criteria and Related Research:
U.S. State Government Tax-Supported Rating Criteria
U.S. Local Government Tax-Supported Rating Criteria
Tax-Supported Rating Criteria
FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.