Fitch Affirms Illinois Housing Development Authority's GO Pledge Rating at 'AA-'; Outlook Stable

NEW YORK--()--Fitch Ratings affirms Illinois Housing Development Authority's (IHDA) general obligation (GO) rating at 'AA-'.

The Rating Outlook is Stable.

SECURITY

IHDA's GO pledge is backed by a full faith and credit pledge of its administrative fund.

KEY RATING DRIVERS

INCREASING FINANCIAL POSITION: In recent fiscal years (FYs), IHDA has consistently reported operating profits, lowered their debt-to-equity position, and increased profitability ratios.

DECLINING GO EXPOSURE: As of June 30, 2015, IHDA's GO exposure has declined approximately 14% since 2013.

MINIMAL VARIABLE-RATE DEBT: IHDA has maintained a low exposure to variable rate debt obligations (12%) in comparison to its peers which is viewed as a credit positive. Approximately 44% of this variable-rate debt is swapped to a synthetic fixed-rate.

SOUND INVESTMENTS: Management maintains conservative investment strategies as evidenced by IHDA's safe and liquid investments.

RATING SENSITIVITIES

STRONG FINANCIALS AND DECLINING EXPOSURE: The continuation of strong financial performance and declining GO exposure would be viewed as a credit positive.

UNANTICIPATED PROGRAM LOSSES: Should program losses be higher than anticipated and begin to deteriorate excess assets there could be negative pressure on IHDA's GO rating. However, the possibility of this is remote given overcollateralization levels within IHDA's programs.

CREDIT PROFILE

The rating represents an overall analysis of the authority's ability to meet its GO obligations. The affirmation primarily reflects IHDA's strong financial position, declining GO exposure, and sufficient reserve levels.

IHDA has consistently demonstrated a strong financial position in recent fiscal years. In FY 2014, IHDA demonstrated a Fitch-adjusted debt to equity ratio of 2.5x which is lower than the FY 2014 median for all 51 state housing finance agencies (SHFAs) of 3.4x. IHDA decreased its debt outstanding to approximately $1.3 billion in FY 2014 from $1.45 billion in FY 2013 which marks the fourth consecutive year of decreases. Additionally, IHDA increased its net interest spread in FY 2014 to 34.3% from 24.5% in FY 2013. In recent years, IHDA has consistently reported positive operating profits despite adverse housing conditions.

As of June 30, 2015, IHDA's GO exposure has declined approximately 14% since 2013. Additionally, management has maintained a low exposure to variable-rate debt obligations in comparison to its peers which is viewed as a credit positive. IHDA has approximately 12% of debt outstanding in the variable-rate mode which is lower than the average of 23% for all 51 SHFAs.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria

Revenue-Supported Rating Criteria (pub. 16 Jun 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=750012

State Housing Finance Agencies General Obligation Rating Criteria (pub. 26 Feb 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=862355

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=993939

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=993939

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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Contacts

Fitch Ratings
Primary Analyst
Ryan J. Pami, +1-212-908-0803
Associate Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Charles Giordano, +1-212-908-0607
Senior Director
or
Committee Chairperson
Maura McGuigan, +1-212-908-0591
Senior Director
or
Media Relations
Sandro Scenga, +1-212-908-0278 (New York)
sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Ryan J. Pami, +1-212-908-0803
Associate Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Charles Giordano, +1-212-908-0607
Senior Director
or
Committee Chairperson
Maura McGuigan, +1-212-908-0591
Senior Director
or
Media Relations
Sandro Scenga, +1-212-908-0278 (New York)
sandro.scenga@fitchratings.com