Press Release|Public Finance

KBRA Affirms AA- Rating for City of Chicago Second Lien Wastewater Transmission Revenue Bonds

30 Oct 2026   |   New York

Contacts

KBRA affirms the AA- long-term rating with a Stable Outlook for the City of Chicago, Illinois Second Lien Wastewater Transmission Revenue Bonds. The rating continues to reflect the City of Chicago (the City) Wastewater System’s (the System) strong financial flexibility, historically stable operating performance, relatively limited operational complexity, and the favorable demographic characteristics of the large and diverse service area.

The Second Lien Wastewater Transmission Revenue Bonds (Second Lien Bonds) are limited obligations of the City, payable solely from a second lien on net revenues of the Sewer Revenue Fund. The City had $1.47 billion of Second Lien Bonds outstanding as of fiscal year end 2025 (FYE, December 31). The Second Lien Bonds are subordinate to $16.3 million of outstanding Senior Lien Wastewater Transmission Revenue Bonds, which mature in 2028, and are senior to $462 million in Illinois Environmental Protection Agency (IEPA) Loans. While the senior lien remains open, the City covenants that it will not issue additional Senior Lien Bonds.

Key Credit Considerations

The rating was affirmed because of the following key credit considerations:

Credit Positives

  • Large, diverse, and stable City of Chicago customer base provides ample resources to fund the operations of the System, which are limited to the collection and conveyance of sanitary and storm sewage.
  • Sound debt service coverage levels have historically been generated by consistent rate increases and the implementation of operational efficiencies.
  • The System has maintained healthy liquidity in each of the last five years.
  • Overall rate affordability is favorable, indicating capacity to implement future rate increases.

Credit Challenges

  • The Master Trust Indenture lacks a DSRF requirement. The 1.10x rate covenant is relatively weak.
  • High leverage, evidenced by long-term debt equal to 63% of net fixed assets at FYE 2025, is expected to remain pressured by a substantial $3.07 billion multi-year CIP that may require significant additional borrowing through 2030.

Rating Sensitivities

For Upgrade

  • Material, sustained reduction in leverage.

For Downgrade

  • The Master Trust Indenture lacks a DSRF requirement. The 1.10x rate covenant is relatively weak.
  • High leverage, evidenced by long-term debt equal to 63% of net fixed assets at FYE 2025, is expected to remain pressured by a substantial $3.07 billion multi-year CIP that may require significant additional borrowing through 2030.

To access ratings and relevant documents, click here.

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.

Information on certain affiliations between directors of KBRA Ratings and rated entities or related third parties 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 US 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. Kroll Bond Rating Agency Japan K.K. is registered as a CRA with the Japan Financial Services Agency. 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: 1017811