City of Chicago, IL – Second Lien Water Revenue Rating Report

Rating Summary

The long-term rating reflects the City of Chicago (the City) Water System’s (the System) solid financial margins, supported by inflation-linked rate increases, sound debt service coverage and liquidity metrics, moderate leverage coupled with significant but manageable new-money borrowing plans, and the favorable demographic characteristics of the large and diverse service area. Offsetting these strengths are the capital-intensive nature of System operations and the significant costs associated with the lead service pipe replacement program, both of which result in the need for periodic debt issuance and rate increases. Comparatively weaker bondholder protections provided under the System’s bond documents are also considerations.

Currently outstanding Second Lien Water Revenue Bonds (Second Lien Bonds) were issued under the amended and restated Master Indenture (Master Indenture). There are no senior lien bonds currently outstanding, the City has closed the senior lien to…