Fitch Places Chicago, IL Motor Fuel Tax Rating on Negative Watch Based on State Credit

NEW YORK--()--Fitch Ratings has placed the 'A-' rating on the following Chicago, IL Motor Fuel Tax bonds on Negative Watch:

--$114.4 million motor fuel tax revenue bonds, series 2003A;

--$62.9 million motor fuel tax revenue bonds, series 2008A;

--$3.7 million motor fuel tax revenue bonds, series 2008B.

The rating action was triggered by the placement of the State of Illinois' general obligation (GO) rating on Rating Watch Negative.

SECURITY

The bonds are secured by a first lien on all motor fuel taxes distributed to the city by the state, subject to annual appropriation by the state legislature.

SENSITIVITY/RATING DRIVERS

STATE RATINGS PLACED ON NEGATIVE WATCH: The Negative Watch results from Fitch's placement of the state of Illinois' general obligation rating on Negative Watch.

PLEDGED REVENUES VULNERABLE TO STATE: Revenues are distributed according to a formula controlled by the state and are subject to annual appropriation by the state. Therefore, the rating on these bonds is capped at one notch below the state's GO rating.

STRONG COVERAGE BY PLEDGED REVENUES: Historical coverage of motor fuel tax debt service by pledged revenues has been strong.

WHAT COULD TRIGGER A RATING ACTION

CHANGE IN STATE RATING: A downgrade in the state's GO rating would result in a downgrade of these bonds.

CREDIT PROFILE

REVENUES VULNERABLE TO STATE; RATING CAPPED BY STATE RATING

Motor fuel tax revenues are collected by the state and local distributions are subject to annual appropriation by the state legislature. In addition, the state has the ability to alter the distribution formula or identify more priority allocations, as distribution of the motor fuel tax revenues only occurs net of these prior allocations. As a result, the rating on the bonds is capped at one notch below the GO rating of the state.

Fitch notes debt service coverage on the city's motor fuel tax bonds has historically been very strong and well in excess of the 2x additional bonds test. Pledged revenues covered motor fuel tax debt service by 3.4x in 2011.

For more information on the state see 'Fitch Places Illinois GO Bonds on Rating Watch Negative' (Jan. 11, 2013), available at www.fitchratings.com.

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Tax-Supported Rating Criteria' (Aug. 14, 2012);

--'U.S. Local Government Tax-Supported Rating Criteria' (Aug. 14, 2012).

--'U.S. State Government Tax-Supported Rating Criteria', (Aug. 14, 2012).

--'Fitch Places Illinois GO Bonds on Rating Watch Negative', (Jan. 11, 2013).

Applicable Criteria and Related Research:

U.S. State Government Tax-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686033

U.S. Local Government Tax-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=685314

Tax-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686015

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.

Contacts

Fitch Ratings
Primary Analyst:
Arlene Bohner, +1-212-908-0554
Director
Fitch, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst:
Eric Friedman, +1-212-908-9181
Director
or
Tertiary Analyst:
Karen Krop, +1-212-908-0661
Senior Director
or
Committee Chairperson:
Laura Porter, +1-212-908-0575
Managing Director
or
Media Relations:
Elizabeth Fogerty, New York, +1 212-908-0526
elizabeth.fogerty@fitchratings.com

Sharing

Contacts

Fitch Ratings
Primary Analyst:
Arlene Bohner, +1-212-908-0554
Director
Fitch, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst:
Eric Friedman, +1-212-908-9181
Director
or
Tertiary Analyst:
Karen Krop, +1-212-908-0661
Senior Director
or
Committee Chairperson:
Laura Porter, +1-212-908-0575
Managing Director
or
Media Relations:
Elizabeth Fogerty, New York, +1 212-908-0526
elizabeth.fogerty@fitchratings.com