KBRA Assigns Ratings to Various Sales Tax Securitization Corporation Sales Tax Securitization Bonds (AAA) and Second Lien Sales Tax Securitization Bonds (AA+); Affirms Ratings for Outstanding Bonds and Second Lien Bonds
12 Nov 2024 | New York
KBRA assigns a long-term rating of AAA to the Sales Tax Securitization Corporation Sales Tax Securitization Bonds, Refunding Series 2024A. KBRA additionally assigns a long-term rating of AA+ to the Corporation's Second Lien Sales Tax Securitization Bonds, Refunding Series 2024A and Second Lien Sales Tax Securitization Bonds, Taxable Refunding Bonds Series 2024B.
Lastly, KBRA affirms the long-term rating of AAA for the Corporation's outstanding Sales Tax Securitization Bonds and AA+ for the Corporation's Second Lien Sales Tax Securitization Bonds.
The rating Outlook is Stable.
Key Credit Considerations
The rating actions 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 and diverse underlying economic base supports substantial residential and tourist retail activity.
- Strong projected coverage of monthly deposit and annual debt service requirements afforded by acceleration of standard set asides.
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 ratings and relevant documents, click here.