- Standard & Poor's lowers rating by six levels from AA+
- Illinois budget impasse has held up money for debt payments
The credit rating of Chicago’s motor fuel tax bonds was slashed six levels by Standard & Poor’s to BBB+, three steps above junk, as the Illinois budget impasse dragged into its fourth month.
The downgrade to the same level as the city’s general obligations comes as near-term payments for the 2008 and 2013 securities depend on Chicago’s “ability and willingness” to pay for the debt, S&P said in a statement Wednesday. Previously, the rating had been based on the strength of the flow of revenue from the state to the city.
Illinois Republican Governor Bruce Rauner and the Democrat-controlled legislature have failed to agree on a spending plan for the year that started July 1, and Chicago hasn’t received monthly motor fuel tax revenue from the state since August, S&P said. The city has about $165 million of the debt outstanding, according to Bloomberg data.
S&P put the ratings on the bonds on "CreditWatch with negative implications” because of the risk that the state funds may not resume in the next 90 days. The downgrade brings S&P more in line with ratings from Moody’s Investors Service, which rates the debt Ba1, one level below junk, and Fitch Ratings, which has a BBB+ rating, three steps above speculative grade. All three credit companies now have Chicago general obligations and motor fuel debt at the same level.
A portion of federally tax-exempt motor-fuel securities due in January 2038 traded Wednesday for $1.01 on the dollar, little changed from earlier in the month, according to data compiled by Bloomberg.