Fitch Ratings

State Of Illinois Downgraded By Fitch Ratings

Fitch Ratings, a major U.S. credit rating agency, announced this afternoon it had downgraded the State of Illinois. From their news release:

Fitch Ratings has downgraded the following ratings of the state of Illinois:

Issuer Default Rating (IDR) to ‘BBB’ from ‘BBB+;
$25.9 billion in outstanding general obligation (GO) bonds to ‘BBB’ from ‘BBB+’;
–$431 million Illinois Sports Facilities Authority sports facilities bonds (state tax supported) to ‘BBB-‘from ‘BBB’;
–$2.6 billion Metropolitan Pier and Exposition Authority McCormick Place expansion project bonds to ‘BBB-‘ from ‘BBB’;
–$267.8 million city of Chicago motor fuel tax revenue bonds to ‘BBB-‘ from ‘BBB’.

The Rating Watch Negative is maintained…

(Editor’s note: Bold added for emphasis)

With this downgrade, Illinois’ new credit rating is just two notches above “junk” status.

Fitch noted:

The downgrade of Illinois’s IDR and related ratings reflects the unprecedented failure of the state to enact a full budget for two consecutive years and the financial implications of spending far in excess of available revenues, which has resulted in increased accumulated liabilities and reduced financial flexibility. Even if the current attempts at a resolution to the extended impasse prove successful, Fitch believes that the failure to act to date has fundamentally weakened the state’s financial profile….

Fitch expects to resolve the Rating Watch within the next six months based on an assessment of the state’s fiscal trajectory as it starts fiscal 2018. If the state continues on the current path, a further downgrade would be warranted

(Editor’s note: Bold added for emphasis)

You can read the entire Fitch Ratings news release here on their website.

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

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Wednesday, February 1st, 2017 Bonds, Borrowing, Credit, Debt Crisis, Fiscal Policy, Government, Spending Comments Off on State Of Illinois Downgraded By Fitch Ratings

SP Intel Report- October 26, 2015

Welcome to the inaugural post of the “SP Intel Report.” On October 15 I blogged big changes were coming to Survival And Prosperity starting October 19. I wrote:

Each day will begin with an “SP Intel Report” (if it’s warranted), where I’ll be focusing on current events locally (Chicagoland area), nationwide, and overseas which I think readers should be aware of…

As luck would have it, my computer crashed October 19, delaying the implementation of these changes.

One week later, I’ve managed to repair my laptop, and I’m back in the saddle again.

So off we go then…

Chicago

“If City Hall ‘loses’ downtown to the bad guys… you lose the tourists, their money, revenue… you get the point.”

Survival And Prosperity, May 4, 2011

The Chicago news media is reporting that two tourists from Minneapolis were robbed at knifepoint by three men near Oak Street Beach late Saturday evening. The male victim was stabbed during the holdup while trying to protect his girlfriend. Two of Chicago’s more upstanding residents have been charged with the crime (police are still looking for a third individual).

The last time I blogged about a tourist getting knifed downtown was back during the 2012 holiday season. Even though it’s been a while, I fear we’ll be hearing of similar incidents with increased regularity as the city’s financial health deteriorates and the Chicago Police Department keeps receiving lip service but not bodies (meaning manpower).

There will probably be plenty of the other based on recent trends.

Note to self. Study up on defense against knives.

Illinois

Speaking of deteriorating financial health, the State of Illinois was hammered by two of the major credit rating agencies in the past week. On October 19, Fitch Ratings announced in a press release:

Fitch Ratings has downgraded the rating on $26.8 billion in outstanding Illinois general obligation (GO) bonds to ‘BBB+’ from ‘A-‘.

In addition, the ratings on bonds related to the state based on its appropriation have been downgraded to ‘BBB’ from ‘BBB+’…

(Editor’s note: Bold added for emphasis)

Three days later, Moody’s Investors Service stated in a release:

Moody’s Investors Service has downgraded the State of Illinois’ $26.8 billion of general obligation bonds to Baa1 from A3, while also lowering ratings on the state’s sales-tax (Build Illinois) bonds to Baa1 from A3, and on the state’s subject to appropriation bonds (issued by the Metropolitan Pier and Exposition Authority and for the state’s Civic Center program) to Baa2 from Baa1. The outlook for all of these obligations remains negative…

(Editor’s note: Bold added for emphasis)

Keep in mind the following observations by Karen Pierog over on the Reuters website on October 22:

Both general obligation bond ratings are now just three steps above the “junk” level… The downgrade by Moody’s marked the 17th by major credit rating agencies for Illinois since 2003… Even before this week’s downgrades, Illinois had the lowest credit ratings among the 50 U.S. states. Ratings histories from the three major credit rating agencies indicate few states have ever had their GO ratings fall below the A level…

Faced with a $105 billion unfunded public pension liability and a bill backlog of around $7 billion, I suspect Illinoisans will be on the hook for some sort of tax hike(s) in the near future.

International

Any Survival And Prosperity readers skeptical about the future existence of the Internet? Personally, I won’t be surprised if it goes kaput one day. Don’t get me wrong, I’m somewhat of a techie (driven by needs, not wants) and love the Internet. But I’m not sold on its staying power due to frailties with its infrastructure. A couple of years ago I remember reading about an elderly Georgian woman accidently cutting off neighboring Armenia’s access to the World Wide Web for up to five hours- using only a spade. And now there’s this from The New York Times website this past Sunday. David E. Sanger and Eric Schmitt reported:

Russian submarines and spy ships are aggressively operating near the vital undersea cables that carry almost all global Internet communications, raising concerns among some American military and intelligence officials that the Russians might be planning to attack those lines in times of tension or conflict.

The issue goes beyond old worries during the Cold War that the Russians would tap into the cables — a task American intelligence agencies also mastered decades ago. The alarm today is deeper: The ultimate Russian hack on the United States could involve severing the fiber-optic cables at some of their hardest-to-access locations to halt the instant communications on which the West’s governments, economies and citizens have grown dependent

(Editor’s note: Bold added for emphasis)

So the Russians could switch off the Internet. Or a rogue Uncle Sam could do it and blame the Russkies.

I told my girlfriend her brilliant nephew should get into the BBS game. Wave of the future?


“Apple II on a BBS in 2014!”
YouTube Video

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

Sources:

Sobol, Rosemary Regina. “$500K, $950K bails set for 2 accused of robbery, stabbing near Oak Street Beach.” Chicago Tribune. 26 Oct. 2015. (http://www.chicagotribune.com/news/local/breaking/ct-police-2-held-following-armed-robbery-stabbing-near-oak-street-beach-20151026-story.html). 26 Oct. 2015.

Pierog, Karen. “UPDATE 2-Illinois bond rating cut again over budget impasse.” Reuters. 22 Oct. 2015. (http://www.reuters.com/article/2015/10/22/illinois-downgrade-moodys-idUSL1N12M2L120151022). 26 Oct. 2015.

Sanger, David E. and Schmitt, Eric. “Russian Ships Near Data Cables Are Too Close for U.S. Comfort.” The New York Times. 25 Oct. 2015. (http://www.nytimes.com/2015/10/26/world/europe/russian-presence-near-undersea-cables-concerns-us.html?_r=1). 26 Oct. 2015.

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Monday, October 26th, 2015 Bonds, Communications, Credit, Crime, Debt Crisis, Entitlements, Europe, Foreign Policy, Government, Knives, Public Safety, Self-Defense, SP Intel Report, Taxes, Technology, Tourism, War Comments Off on SP Intel Report- October 26, 2015

Crain’s Chicago Business: Pension Reform Ruling Could Cost Taxpayers Extra $200 Million A Year Through End Of Decade

In my Sunday post about Chicago’s pension reform legislation being ruled unconstitutional, I blogged:

Chicagoans- let that last line from Dardick and Pearson sink in real good:

“Taxpayers could eventually be on the hook for hundreds of millions of dollars more in annual payments to those city funds — before the even worse-funded police and fire retirement accounts are factored into the taxing equation…”

How many hundreds of millions are we talking about here?

Greg Hinz wrote in his blog on the Crain’s Chicago Business website Monday:

The court decision throwing out a deal to refinance two Chicago pension funds appears to be among the most costly in the city’s history, in some ways ranking right up there with the Great Chicago Fire.

Exact figures are not available and vary some depending on who’s doing the estimating. But based on statements by city officials and documents filed by the pension funds themselves, it’s likely that the decision by Cook County Circuit Court Judge Rita Novak will cost city taxpayers around $200 million a year through the end of the decade—and will keep rising for decades thereafter.

“You’d have to go back to either the Depression or the Great Fire to find a comparable situation in which the city faced either greater challenges or more painful decisions,” Civic Federation President Laurence Msall said. “It’s clearly going to result in increased taxes and reduced services.”

(Editor’s note: Bold added for emphasis)

Remember, that additional $200 million hit to Chicago taxpayers would come on top of addressing fire and police pensions. And bailing out the Chicago Public Schools, which had its credit rating reduced to junk status today by Fitch Ratings. In May, I noted Moody’s downgraded the Chicago Board of Education (the primary debt issuers of CPS) three notches to junk.

You can read Hinz’s entire blog post on the Crain’s Chicago Business website here. If I were still a Chicago resident, I’d probably find it disturbing. But at least I’d be clued in as to what could be coming down the line.

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

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Tuesday, July 28th, 2015 Credit, Debt Crisis, Depression, Education, Entitlements, Fiscal Policy, Government, Taxes Comments Off on Crain’s Chicago Business: Pension Reform Ruling Could Cost Taxpayers Extra $200 Million A Year Through End Of Decade

Chicago’s Credit Rating Lowered By Fitch Ratings, Moody’s, Standard & Poor’s

The three major U.S. credit rating agencies have downgraded the City of Chicago this past week. Last Tuesday, Moody’s announced on its website:

Rating Action: Moody’s downgrades Chicago, IL to Ba1, affecting $8.9B of GO, sales, and motor fuel tax debt; outlook negative

Also downgrades senior and second lien water bonds to Baa1 and Baa2 and downgrades senior and second lien sewer bonds to Baa2 and Baa3, affecting $3.8B; outlook negative

New York, May 12, 2015 — Moody’s Investors Service has downgraded to Ba1 from Baa2 the rating on the City of Chicago, IL’s $8.1 billion of outstanding general obligation (GO) debt; $542 million of outstanding sales tax revenue debt; and $268 million of outstanding and authorized motor fuel tax revenue debt…

In case readers didn’t notice, that was a two-notch downgrade from “Baa2” to “Ba1.”

According to Moody’s “US Municipal Ratings,” “Ba” indicates “Issuers or issues rated Ba demonstrate below-average creditworthiness relative to other US municipal or tax-exempt issuers or issues.”

In other words, “junk.”

A day later, Moody’s was at it again, lowering the Chicago Board of Education’s credit rating. From their site on May 13:

Moody’s downgrades Chicago Board of Education, IL’s GO to Ba3; outlook negative

Ba3 rating applies to $6.2 billion of GO debt

New York, May 13, 2015 — Moody’s Investors Service has downgraded to Ba3 from Baa3 the rating on the Chicago Board of Education, IL’s $6.2 billion of outstanding general obligation (GO) debt. The Chicago Board of Education is the primary debt issuer for the Chicago Public Schools (CPS) (the district). The outlook remains negative…

A three-notch downgrade. And even worse “junk.”

Standard & Poor’s joined in on the downgrade parade later in the week. From a press release Friday:

Chicago, IL GO Bond Ratings Lowered To #A-# From #A+#, Placed On CreditWatch Due To Short-Term Liquidity Pressure

CHICAGO–15 May–Standard & Poor’s

CHICAGO (Standard & Poor’s) May 14, 2015–Standard & Poor’s Ratings Services lowered its rating to ‘A-‘ from ‘A+’ on the city of Chicago’s outstanding general obligation (GO) bonds, and placed the ratings on CreditWatch with negative implications…

According to the S&P website, “A” indicates:

Somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligor’s capacity to meet its financial commitment on the obligation is still strong.

Fitch Ratings was the last of the three major credit rating agencies to the party, releasing the following Friday on their website:

Fitch Downgrades Chicago, IL’s ULTGOs and Sales Tax Bonds to ‘BBB+’; Ratings on Negative Watch

Fitch Ratings-New York-15 May 2015: Fitch Ratings has downgraded the ratings on the following Chicago, Illinois obligations:

–$8.1 billion unlimited tax GO bonds to ‘BBB+’ from ‘A-‘;
–$546.5 million (accreted value) sales tax bonds to ‘BBB+’ from ‘A-‘;
–$200 million commercial paper notes, 2002 program series A (tax exempt) and B (taxable) bank bond ratings to ‘BBB’ from ‘BBB+’.

At the same time, the ratings have been placed on Negative Watch…

According to the Fitch Ratings website, “BBB” indicates:

Expectations of default risk are currently low. The capacity for payment of financial commitments is considered adequate but adverse business or economic conditions are more likely to impair this capacity.

You can read the May 12 Moody’s press release on their website here. The May 13 Moody’s release is here. Standard & Poor’s press release can be found here (on thailand4.com) and the Fitch Ratings release on their website here.

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

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Sunday, May 17th, 2015 Bonds, Credit, Debt Crisis, Education, Government Comments Off on Chicago’s Credit Rating Lowered By Fitch Ratings, Moody’s, Standard & Poor’s
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