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The
credit rating agency assigned the state's current Baa3 rating to
the general obligation bonds. Illinois' first bond issue this
year will be sold competitively with the proceeds earmarked for
capital and information technology projects, according to a
state official familiar with the sale. A pricing date was not
available.
Moody's said the rating outlook remains negative, "based on our
expectation of continued growth in the state's unfunded pension
liabilities, the state's difficulties in implementing a balanced
budget that will allow further reduction of its bill backlog,
and elevated vulnerability to national economic downturns or
other external factors."
It warned the rating could be downgraded to the junk level if
Illinois' unpaid bill backlog increases, pension funding is
reduced, or if the state is unable to manage impacts from a
future recession, trade war or reductions in federal funding for
Medicaid.
Illinois, the lowest-rated U.S. state, sold $6 billion of GO
bonds in October to reduce an unpaid bill backlog that ballooned
to a record $16.67 billion last year. It also sold $750 million
of GO bonds in November to fund capital projects and information
technology.
Investors are demanding higher yields for Illinois bonds than
for GO bonds issued by other states. Illinois' so-called credit
spread over Municipal Market Data's benchmark triple-A yield
scale has widened from 177 basis points in early January to 208
basis points as of Wednesday. (Reporting by Karen Pierog Editing
by Matthew Lewis)
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