KBRA assigns a long-term rating of AAA to the State of Oregon Department of Administrative Services Oregon State Lottery Revenue Bonds, Series 2026A and Series 2026B (Taxable). Concurrently, KBRA affirms the AAA rating on the State's outstanding State Lottery Revenue Bonds. The Outlook is Stable.

State Lottery Revenue Bonds are payable solely from a constitutionally required priority lien on: i) amounts derived from operation of the Oregon State Lottery, net of amounts used for the payment of prizes and Lottery expenses (the Unobligated Net Lottery Proceeds); ii) any Federal interest subsidy payments from the Federal Government relating to Build America Bonds; and iii) all amounts in any Lottery Revenue Bond funds under the Master Indenture (the Pledged Revenues).

Proceeds of the Series 2026 Bonds will fund a variety of loans or grants for projects across the State, a deposit to the Prior Bonds Reserve Subaccount, and the costs of issuance. With the issuance of the Series 2026 Bonds, there will be approximately $1.5 billion in Lottery Revenue Bonds outstanding.

Key Credit Considerations

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

Credit Positives

• The Lottery provides essential funding for programs including economic development, parks and national resources, veterans’ services and the State’s Education Stability Fund.
• The resiliency of Pledged Revenues, which rebounded strongly following the 2020 pandemic-related closures of bars and taverns which severely curtailed video lottery sales.
• Strong legal protections include a 4.0x additional bonds test (ABT), debt service pre-funding mechanism, availability of debt service reserves fully funded at aggregate maximum annual debt service (MADS), and the moral obligation of the State.

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.

Rating Sensitivities

For Upgrade

• Not applicable

For Downgrade

• Sustained decline in Lottery sales resulting in significantly diminished coverage of Lottery Revenue Bond debt service from Unobligated Net Lottery Proceeds.

To access ratings 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), one of the major credit rating agencies (CRA), is a full-service CRA 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 (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: 1014424

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