KBRA Assigns AAA, Stable Outlook to State of Wisconsin Transportation Revenue Refunding Bonds
5 Mar 2025 | New York
KBRA assigns a long-term AAA rating with a Stable Outlook to the Transportation Revenue Refunding Bonds, 2025 Series 1 to be issued by the State of Wisconsin ("the State"). Concurrently, KBRA affirms the long-term AAA rating, with a Stable Outlook on approximately $1.4 billion of outstanding Transportation Revenue Bonds (TRBs). TRBs are secured by a first lien pledge of Program Income, including vehicle Registration Fees and Other Registration-Related fees.
Proceeds of the 2025 Series 1 Bonds will current refund all or a portion of certain outstanding TRBs for debt service savings and pay costs of issuance. The State plans to potentially accomplish the current refunding through (i) the purchase of certain TRB maturities tendered by invited bondholders and (ii) optionally redeeming, on July 1, 2025, certain outstanding TRBs that are not purchased.
Key Credit Considerations
Credit Positives
- Steady growth in pledged revenues, aided by proactive legislative rate adjustments, enables strong MADS coverage.
- Strong legal framework, including strong additional bonds test for TRB’s (2.25x), and covenant to charge sufficient vehicle registration fees and registration-related fees to pay debt service.
- The essential nature of pledged revenues (Program Income), which consist largely of motor vehicle registration and related fees that are imposed and collected statewide.
Credit Challenges
- Vehicle registration fees may be sensitive to broader economic trends, though any potential declines are unlikely to impact the rating given strong coverage levels and the State’s history of adjusting fees.
The Stable Outlook reflects KBRA’s expectation that Program Income will continue to provide strong coverage of TRB debt service, and that the State will continue its long-standing practice of monitoring and adjusting transaction fees, when necessary.
Rating Sensitivities
For Upgrade
- Not applicable at AAA rating level.
For Downgrade
- A sustained decline in Program Income. The State’s proactivity in maintaining rates to ensure consistent funding of debt service helps to mitigate this risk.
- While unlikely, the overleveraging of pledged revenues leading to a significant decline in MADS coverage.
To access ratings and relevant documents, click here.