NEW YORK--()--KBRA assigns a long-term rating of AA+ with a Stable Outlook to the State of Illinois (the "State"), Build Illinois Bonds (Sales Tax Revenue Bonds), Junior Obligation Series A, B, and C of March 2025 (the "Bonds"). KBRA additionally affirms the long-term rating of AA+ with a Stable Outlook for the State of Illinois' outstanding parity Build Illinois Bonds (Sales Tax Revenue Bonds), Junior Obligation.

KBRA’s Stable Outlook reflects the ample coverage of junior obligation debt service (69.8x for fiscal year 2024), supported by a broad-based, statewide source of sales tax revenues. The Outlook further reflects KBRA’s expectation that pledged sales tax revenues will continue to grow at a modest pace maintaining ample coverage of Build Illinois Bond obligations, and that future debt issuance authorized under the Build Illinois Bond Act will not materially dilute coverage levels.

Key Credit Considerations

The rating action reflects the following key credit considerations:

Credit Positives

  • Security provisions are strong and include a priority lien on State sales tax revenues after payment of senior lien Build Illinois Bonds, a continuing appropriation requirement, and strong non-impairment language.
  • The Bonds’ additional bonds test (ABT) requires 10.2x coverage of maximum annual debt service on combined debt outstanding, which significantly restricts the potential to overleverage.
  • Expansive and diverse statewide sales tax base that has historically provided extraordinary coverage. For the past five fiscal years, debt service coverage has ranged from 30x-46x on combined senior and junior Build Illinois Bond obligations' annual debt service.

Credit Challenges

  • The Bonds are secured by sales tax revenues, which can at times be adversely affected by economic factors, although the strong coverage levels and highly restrictive additional bonds test (ABT) helps insulate the Bonds from associated risks.

Rating Sensitivities

For Upgrade

  • Accelerated growth in pledged revenue collections, coupled with manageable debt levels.

ESG Considerations

For Downgrade

  • While unlikely, an instance wherein the State leverages debt levels to the ABT, in combination with a substantial economic downturn contributing to a sustained, sharp reduction in State sales tax revenues.

To access ratings and relevant documents, click here.

Methodologies

Disclosures

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA), one of the major credit rating agencies (CRA), is a full-service CRA registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a Designated Rating Organization (DRO) by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized as a Qualified Rating Agency by Taiwan’s Financial Supervisory Commission and is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider (CRP) in the U.S.

Doc ID: 1008319