Press Release|Public Finance
KBRA Affirms AA+ Rating for State of Illinois Build Illinois Bonds (Sales Tax Revenue Bonds), Junior Obligation
31 Jan 2025 | New York
KBRA affirms the long-term rating of AA+ with a Stable Outlook for the State of Illinois Build Illinois Bonds (Sales Tax Revenue Bonds), Junior Obligation.
Key Credit Considerations
The rating was affirmed because of 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 Bonds, a continuing appropriation requirement, and strong non-impairment language.
- Junior Bonds’ additional bonds test (ABT) requires 10.2x coverage of MADS on combined debt outstanding, which significantly restricts the potential to overleverage.
- Expansive and diverse state-wide sales tax base that has historically provided extraordinary coverage of over 40x MADS for combined Senior and Junior Bonds.
Credit Challenges
- Bonds are secured by sales taxes, which may at times be adversely affected by economic factors. Nevertheless, strong coverage levels and a highly restrictive ABT insulate outstanding Junior Bonds from associated risks.
Rating Sensitivities
For Upgrade
- Accelerated growth in pledged revenue collections, coupled with manageable debt levels.
For Downgrade
- While unlikely, an instance wherein the State leverages debt levels to the ABT in combination with an extremely significant economic downturn that results in a sharp reduction in State sales tax revenues.
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