NEW YORK--(BUSINESS WIRE)--
Kroll Bond Rating Agency (KBRA) assigns a long-term rating of AA with a
stable outlook to the $400 million Second Lien Water Revenue Bonds,
Project Series 2014 of the City of Chicago, Illinois. KBRA has also
assigned an AA rating with a stable outlook to all of the City of
Chicagoís outstanding second lien water revenue bonds. Upon delivery of
the current issue, the City will have approximately $2.322 billion in
outstanding second lien water revenue bonds. This rating is based on
KBRAís U.S. Municipal Water and Sewer Revenue Bond Methodology published
February 20, 2014.
The System, an enterprise fund of the City of Chicago, is characterized
by a large, diverse, and stable metropolitan Chicago customer base that
includes the City, and 125 suburban communities. The System benefits
from a high quality, reliable Lake Michigan water source; it is an
essential service with substantial excess system capacity. In KBRAís
opinion, the current administration has taken proactive steps to
increase debt service coverage, improve liquidity, and address system
capital needs. Operational efficiencies that have reduced staffing
levels and slowed the pace of expense growth have been enacted. A series
of recent large water rate increases has boosted coverage, and provided
the basis for significant current funding for aging infrastructure
requirements. Nevertheless, water rates remain very competitive with
major U.S. water systems. Second lien revenue bond coverage now
approximates 2.4x debt service requirements, and Water Rate
Stabilization Fund resources are about 25 percent of annual system
operating expenses. KBRA views the Systemís increased pension funding
obligation under recently enacted State legislation as manageable.
Although the systemís debt to net fixed asset ratio is high, KBRA
believes that increased current funding of capital needs will moderate
future debt issuance.
The stable outlook reflects KBRAís expectation that customer growth
trend continues, expiring contracts with suburban customers are
extended, and the commitment to the water capital improvement plan is
adhered to, and remains on schedule, without significant cost overruns.
KBRA also expects debt service coverage margins to stay in excess of
indenture requirements, and favorable water quality trends to be
To view the report, please visit www.krollbondratings.com.
About Kroll Bond Rating Agency
KBRA is registered with the U.S. Securities and Exchange Commission as a
Nationally Recognized Statistical Rating Organization (NRSRO). In
addition, KBRA is recognized by the National Association of Insurance
Commissioners (NAIC) as a Credit Rating Provider (CRP).
Kroll Bond Rating
Harvey Zachem, 646-731-2385
Source: Kroll Bond Rating Agency