Berwyn, IL GO Debt Rating Lowered To 'BBB' On Substantial New-Money Debt Issuance

CHICAGO (S&P Global Ratings) March 1, 2019--S&P Global Ratings lowered its 
rating to 'BBB' from 'BBB+' on Berwyn, Ill.'s existing general obligation (GO) 
bonds. The outlook is stable.

"The downgrade reflects the combination of the issuance of substantial 
new-money debt by the Berwyn Municipal Securitization Corp. (the corporation), 
the ongoing use of bond proceeds to fund pension obligations, and some 
additional limits to the city's future budgetary flexibility and liquidity 
stemming from the securitization of revenues that were previously fully 
available for operations, all of which we are viewing against the backdrop of 
a weak economy with a highly leveraged tax base," said S&P Global Ratings 
credit analyst Scott Nees. 

Following the issuance of the corporation's series 2019A conveyed tax 
securitization bonds and its series 2019B taxable conveyed tax securitization 
bonds, we calculate Berwyn's direct debt at around 2.6x governmental fund 
revenues and its overall net debt-to-market value ratio at an elevated 13% and 
note that the city has additional debt plans. We also note that its all-in 
fixed costs (including debt service, along with required pension contributions 
and other postemployment benefit actual contributions) were 29% of adjusted 
governmental fund expenditures in the most recently audited fiscal year, with 
only 20% of its direct debt scheduled to be retired in the next 10 years, and 
we expect fixed costs to remain high well into the future. 

The city's GO debt is secured by its full faith and credit and an agreement to 
levy ad valorem property taxes without limit as to rate or amount. 

The city, with an estimated population of 56,430, is in Cook County.

"The stable outlook reflects our view of Berwyn's currently strong budgetary 
flexibility with stable reserves and strong liquidity, and our view that the 
city will likely maintain these key credit strengths despite the pressures in 
its overall credit profile," added Mr. Nees. The pressures we have discussed 
above are primarily long term and introduce a level of risk that is consistent 
with what we typically observe among 'BBB' rated peers. However, they are also 
manageable, in our view, without further deterioration in credit quality if 
the city can continue to raise revenues sufficient to match ongoing operating 
costs, while servicing its significant liability profile and maintaining a 
strong financial position. Given that we expect relative near-term fiscal 
stability and do not foresee credit pressures significant enough to warrant a 
lower rating in the next two years, we do not expect to lower the rating in 
the outlook horizon.
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