City Colleges of Chicago, IL GO Debt Rating Lowered To #BBB# On Weaker Finances, State Budget On Watch Neg

Stocks and Financial Services Press Releases Friday April 21, 2017 09:16
CHICAGO--21 Apr--S&P Global Ratings

CHICAGO (S&P Global Ratings) April 20, 2017--S&P Global Ratings lowered its rating four notches to 'BBB' from 'A+' on Cook County Community College District (CCD) No. 508 (City Colleges of Chicago), Ill.'s outstanding unlimited-tax general obligation (GO) bonds. We also placed the rating on CreditWatch with negative implications.

"The downgrade reflects substantially weakened unrestricted net assets and a trend of operating deficits leading to a negative fund balance," said S&P Global Ratings credit analyst Blake Yocom, "along with liquidity pressure caused in part by reduced and unreliable state funding." Other factors include declining enrollment and potential risks of a weakened financial position should the state fail to adopt a fiscal 2017 and 2018 state budget and no additional funds are appropriated for CCDs.

"We placed the rating on CreditWatch Negative due to the ongoing state budget impasse and its effects on the district's finances, namely its negative fund balance and pressured liquidity, the receipt and analysis of the district's cash flow projections, and whether its plan to address liquidity pressures over the immediate term is sufficient," added Mr. Yocom.

The outstanding series 2013 bonds are secured by the district's unlimited ad valorem tax GO pledge.
The bonds are alternate revenue source bonds payable from tuition and fees, state grants, and other pledged revenues.
If pledged revenues are insufficient, the bonds are also secured by unlimited ad valorem property taxes.

Under the bond resolution and trust indenture, City Colleges will abate the annual tax levy only to the extent that pledged revenues are on deposit in the pledged revenues account to pay debt service. The rating is based on the unlimited-tax GO pledge, which we view as the stronger security.

City Colleges operates seven community colleges in the city, serving a population of 2.7 million in boundaries coterminous with Chicago. Most of the district's tax base is in Cook County, with a very small portion in DuPage County.

Total semester credit hours generated peaked at 1.26 million in 2010 and have since declined by 22% to 983,907 in 2016.

"The CreditWatch reflects our view that there is at least a one-in-two likelihood of a rating change within the next 90 days," added Mr. Yocom, "and credit quality could deteriorate further pending receipt and analysis of the district's cash flow projections and whether its plan to address liquidity pressures in the immediate term is sufficient." The lack of an articulated plan to address continued shortfalls in state funding and a sufficient plan to manage its liquidity would likely lead to further deterioration in credit quality.

Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at www.standardandpoors.com for further information.

Complete ratings information is available to subscribers of RatingsDirect at www.globalcreditportal.com and atwww.spcapitaliq.com.
All ratings affected by this rating action can be found on the S&P Global Ratings' public website at www.standardandpoors.com. Use the Ratings search box located in the left column.

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