Courtesy of Mish.
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At long last, the stench from Chicago is so strong that Fitch can finally smell it. Fitch just now downgraded Chicago Board of Education General Obligation bonds to junk status.
Fitch and the S&P were holdouts because there's money to be made by purposely pretending a manure factory is a rose garden.
MarketWatch reports Fitch Downgrades Chicago Board of Ed (IL) ULTGOs to 'BB+'.
Fitch Ratings has downgraded the Chicago Board of Education, IL's (the board) approximately $6.1 billion of unlimited tax general obligation (ULTGO) bonds to 'BB+' from 'BBB-'. The rating has been placed on Negative Watch.
Rating Drivers
- Continued financial stress
- Dependency on borrowing
- Cash flow drain
- Pension liability weakness
- Poor labor history
- Unfavorable debt position
- Structural imbalances
- Mounting fixed costs
- Limited options to address large budgetary gaps
- Growing gap for fiscal year 2016
- Liquidity concerns
- Negative cash balances
- Swap termination triggers
Fitch can finally smell enough stench from the above rating drivers to label the bonds as junk.
The "J" Word
The downgrade from BBB- to BB+ is a downgrade to a "non-investment" rating, commonly labeled "junk". Curiously, MarketWatch just could not bear the say the "J-Word".
MarketWatch reports "Fitch would downgrade the rating further if there is not clear and meaningful progress over the next several months in reducing the large structural imbalance."
I think we can count on that.
Deep Into Junk…
[Picture of Chicago via Pixabay.]
