Chicago school board approves $1 bln
bonds for junk-rated district
Send a link to a friend
[October 27, 2016]
CHICAGO (Reuters) - The Chicago
Board of Education gave final approval on Wednesday to the sale of up to
$1 billion of new and refunding bonds for the junk-rated district.
The third-largest public school system in the United States will sell up
to $840 million of general obligation bonds through Barclays and JP
Morgan Securities to fund capital improvements using a $45 million
property tax hike approved by the Chicago City Council last year. The
district will also restructure up to $160 million of variable-rate bonds
into a fixed-rate mode through a yet-to-be-announced underwriting team.
Emily Bittner, a Chicago Public Schools (CPS) spokeswoman, said earlier
this week that market conditions will dictate when the deals will be
priced.
CPS is struggling with pension payments that will jump to about $720
million this fiscal year from $676 million in fiscal 2016, as well as
drained reserves and debt dependency. As a result, the district's credit
ratings have fallen deeper into the junk category, most recently with a
downgrade from Moody's Investors Service.
The muni market has demanded fat yields for CPS debt. Even a private
sale of $150 million of 30-year GO bonds by CPS in July to J.P. Morgan
came at a 7.25 percent yield, which was 513 basis points over the yield
for AAA-rated bonds on Municipal Market Data's (MMD) benchmark scale.
[to top of second column] |
![](../images/ads/current/richardson_lda_090916.png)
Meanwhile, uncertainties lurk for CPS. A proposed four-year contract
that averted a teachers' strike earlier this month is scheduled for
a ratification vote by Chicago Teachers Union members next week. New
money for classrooms under the tentative deal will flow from a
nonrecurring revenue source - surplus property taxes generated by
city economic development districts.
![](http://archives.lincolndailynews.com/2016/Oct/27/images/ads/current/maskeauction_sda_022614.png)
The school district's $5.46 billion operating budget includes a
one-time, $215 million state of Illinois pension contribution that
is contingent on the legislature's passage of major state-wide
pension reforms by January.
(Reporting By Karen Pierog; editing by Grant McCool)
[© 2016 Thomson Reuters. All rights
reserved.]
Copyright 2016 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed. |