Fitch IBCA Rates Illinois Power Co.'s $864 Million Transitional Funding Trust Notes with 'AAA' Rating

Strategic Insights -

Fitch IBCA has assigned a 'AAA' rating to Illinois Power Co.'s $864 million special purpose trust transitional funding trust notes, series 1998-1. The notes are backed by a property right to receive future cash flows from electricity customers of Illinois Power, with seven serial classes having expected maturities ranging from 18 months to 10 years. The rating is based on the strength and stability of the underlying tariff cash flows, established by an Illinois statute and the Illinois Commerce Commission's regulatory order. Illinois Power will act as master servicer for the forecasting, adjustment, and collection of the cash flows.

Key Takeaways:

  • The $864 million special purpose trust transitional funding trust notes, series 1998-1, are rated 'AAA' by Fitch IBCA.
  • The notes are collateralized by a property right to receive future cash flows (Instrument Funding Charges or IFCs) from electricity customers of Illinois Power.
  • Seven serial classes of notes have expected maturities ranging from 18 months to 10 years.
  • The 'AAA' rating is based on the strength and stability of the underlying tariff cash flows established by an Illinois statute and the Illinois Commerce Commission's regulatory order.
  • Illinois Power will act as master servicer for the forecasting, adjustment, and collection of the cash flows.
  • Illinois Power serves approximately 577,000 electric and 408,000 gas customers in a service territory of approximately 15,000 square miles throughout Illinois.
  • As of December 1997, Illinois Power had consolidated revenues of over $1.2 billion and assets of $5.3 billion.
  • Fitch IBCA rates Illinois Power's senior debt 'BBB+'.
  • Fitch IBCA has performed due diligence on Illinois Power's customer billing, collection, and forecasting systems and methodologies and finds them to be well-qualified to act as master servicer.

Statistics:

  • $864 million: The size of the special purpose trust transitional funding trust notes, series 1998-1.
  • 18 months: The shortest expected maturity of the notes.
  • 10 years: The longest expected maturity of the notes.
  • 12 years: The ultimate legal final maturity of the notes.
  • 0.5%: The equity account equal to original principal balance that will be funded at close.
  • 0.5%: The overcollateralization equal to additional original principal balance that will be funded throughout the term of the transaction.
  • 577,000: The approximate number of electric customers served by Illinois Power.
  • 408,000: The approximate number of gas customers served by Illinois Power.
  • 15,000: The approximate square miles of the service territory served by Illinois Power.
  • $1.2 billion: The consolidated revenues of Illinois Power as of December 1997.
  • $5.3 billion: The assets of Illinois Power as of December 1997.

Sources:

  • Fitch IBCA's website: www.fitchibca.com
  • Fitch IBCA's press release, "Fitch IBCA Expects To Rate Ill Pwr Trnstnl Funding Trst Nts," December 7, 1998
  • Fitch IBCA's report, "Utility Stranded Costs: Rating the Securitization of Transition Tariffs," September 24, 1998
  • Fitch IBCA's report, "Utility Securitization Q&A," October 8, 1998.