KBRA Assigns AAA Rating to Oregon State Lottery Revenue Bonds, 2024 Series A - D; Affirms Rating for Parity Bonds

KBRA assigns a long-term rating of AAA to the State of Oregon Department of Administrative Services: Oregon State Lottery Revenue Bonds, 2024 Series A (Tax-Exempt Projects & Refunding); Oregon State Lottery Revenue Bonds, 2024 Series B (Federally Taxable Projects); Oregon State Lottery Revenue Bonds, 2024 Series C (Tax-Exempt Refunding); and, Oregon State Lottery Revenue Bonds, 2024 Series D (Tax-Exempt Refunding). KBRA additionally affirms the long-term rating of AAA for parity Oregon State Lottery Revenue Bonds. The Outlook is Stable.

Key Credit Considerations

The rating actions reflect the following key credit considerations:

Credit Positives

• The Lottery enjoys statewide support as an essential resource, funding 6.1% of FY 2023 State General Fund expenditures. KBRA expects that the State would likely honor its moral obligation to replenish draws on debt service reserves, if necessary, given the essentiality of the Lottery to State operations.
• Pledged Revenues have proven resilient, including in 2020, when pandemic-related closures of bars and taverns led to periods with virtually no video lottery sales.
• Strong legal protections include the 4.0x ABT, debt service pre-funding mechanism, and availability of debt service reserves fully funded at aggregate MADs.

Credit Challenges

• Lottery sales are discretionary and economically sensitive in nature.
• Increasing competition for entertainment and gaming dollars, as well as changing generational preferences, may contribute to reduced Lottery revenues over the long term.
• The Lottery’s ability to attract new players is subject to external factors including demographics and hard to predict shifts in consumer entertainment preferences.
• The State has not approved expansion of the Lottery into mobile gaming, including betting on college sports, once considered a potential driver of future gaming revenue growth.

Rating Sensitivities

For Upgrade

• N/A

For Downgrade

• Sustained decline in Lottery sales that results in significantly diminished coverage of Lottery Revenue Bond debt service from unobligated net lottery proceeds.

To access rating and relevant documents, click here.

Methodologies

• Public Finance: General Revenue Bond Methodology
• ESG Global Rating 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.

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) is a full-service credit rating agency registered with the U.S. 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. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider.

Doc ID: 1003741

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