KBRA assigns a long-term rating of AA- to the Metropolitan Pier and Exposition Authority (Illinois) (the Authority) McCormick Place Expansion Project Refunding Bonds, Series 2026A. Concurrently KBRA affirms the AA- rating on the Authority’s outstanding McCormick Place Expansion Project Bonds. The Outlook is Stable.
Proceeds of the Series 2026A Bonds will refinance certain outstanding bonds of the Authority; fund capitalized interest on the Series 2026A bonds and pay the costs of issuance.
Expansion Project Bonds (the Bonds), including the Series 2026A Bonds, are secured by a pledge of Authority Tax revenues, which consist of a 1% food and beverage tax levied in the Chicago central business area and at Chicago-Midway and Chicago-O’Hare International Airports, a 2.5% hotel tax collected city-wide, a 6% rental car tax collected throughout Cook County, and airport ground transportation departure taxes levied at the two airports. These revenue sources recorded substantial volatility due to the COVID-19 pandemic but have exceeded prior highs since Fiscal Year (FY) 2023 (FY end June 30).
The Bonds are additionally secured by a maximum of $300 million of State sales tax receipts (rises in steps to $450 million in 2036), subject to a prior lien granted the State’s outstanding Build Illinois Bonds, which may be utilized to offset deficiencies in Authority tax revenue.
Key Credit Considerations
Credit Positives
- Sound, diverse stream of Authority taxes that approximates annual debt service bolstered by a pledge of expansive, steady state-wide sales tax revenue that raises annual debt coverage to more than 2.5x.
- McCormick Place, the largest convention center in North America, holds a leading position in the national convention and trade show market.
- Bond security features strong State non-impairment language and State appropriation actions in support of MPEA underscore the importance of McCormick Place to regional and state economy.
Credit Challenges
- Authority tax revenues are cyclically sensitive and have occasionally fallen below annual debt service requirements, resulting in draws on State sales tax support.
- Ascending debt service schedule prompts a need for periodic refundings to match annual debt service requirements with Authority tax revenues and minimize draws on pledged State sales tax revenues.
- Vulnerability of State appropriation dependent payment mechanism underscored by absence of timely action in 2015.
Rating Sensitivities
For Upgrade
- Growth in Authority tax revenues to a level sufficient to provide ample coverage of debt service requirements, obviating the need for either draws on the State sales tax or periodic debt restructuring.
For Downgrade
- Failure of State to appropriate funds for payment of debt service.
- Underperformance of Authority taxes resulting in an increased reliance on state resources.
To access ratings and relevant documents, click here.
Methodologies
- Public Finance: U.S. Special Tax Revenue Bond Rating Methodology
- Public Finance: U.S. State Annual Appropriation Obligation Rating Methodology
Disclosures
A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.
Information on the meaning of each rating category can be located here.
Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.
About KBRA
Kroll Bond Rating Agency, LLC (KBRA), one of the major credit rating agencies (CRA), is a full-service CRA registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a Designated Rating Organization (DRO) by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized as a Qualified Rating Agency by Taiwan’s Financial Supervisory Commission and is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider (CRP) in the U.S.
Doc ID: 1016987
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