MOODY'S LOWERS REGIONAL TRANSPORTATION AUTHORITY (ILLINOIS) GENERAL OBLIGATION BOND RATING TO Aa3 FROM Aa2; ASSIGNS Aa3 RATING TO $140 MILLION GENERAL OBLIGATION WORKING CASH NOTES SERIES 2010C (TAXABLE)

Posted on: June 25, 2010, 12:26 pm

NEW YORK, Jun 25, 2010 -- Moody's Investors Service has lowered the Regional Transportation Authority (RTA) of Illinois' general obligation debt ratings to Aa3 from Aa2 and has assigned the new rating to RTA's planned $140 million General Obligation Working Cash Notes, Series 2010C (Taxable). The downgrade, affecting about $2.3 billion of previously issued debt, results from RTA's vulnerability to the growing fiscal difficulties of the State of Illinois (A1, stable outlook): in particular, RTA's continued reliance on short-term debt to manage delayed state aid payments indicates increasing liquidity stress. The current issue and parity G.O. obligations are secured primarily by RTA revenues from regional sales taxes levied in Chicago (Aa2, stable outlook), Cook County (Aa2, stable outlook) and in surrounding counties served by RTA's three transit agencies. The fiscal challenges of the state have increasingly impeded the timely payment of state funds also pledged to the bonds and have caused RTA to delay payments to transit operating units that RTA oversees. Sales tax collections, while benefitting from rate increases in 2008, have fallen short of forecast because of the recession. RTA intends to use the current issue, which has a two-year maturity, to make overdue payments to the transit agencies. RTA further plans future refinancing issues to roll over its short-term obligations if funds are not forthcoming from the state, which will amount to $400 million -- the maximum authorized amount -- including the Series 2010C notes. Additional parity debt can only be issued if regional sales tax revenues are 2.5 times any subsequent year's debt service. Because the proposed working cash notes will bring the RTA to this level, RTA may create a subordinate-lien credit that could be used next year to refinance some of its $260 million of outstanding short-term debt. The outlook at the lower rating level is nevertheless stable, reflecting bondholders' first lien on RTA revenues that provide healthy coverage and the essentiality of RTA's multi-modal transit system for the City of Chicago...

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