CHICAGO Jan 13 Illinois will sell $1 billion of
general obligation bonds on Feb. 6 in its first tax-exempt debt
deal since enacting reforms to its public pension system last
month, a state official said on Monday.
John Sinsheimer, the state's capital markets director, said
the bonds will be priced through Citibank, with proceeds
earmarked for the state's ongoing capital improvement program.
"We're going to do an extensive road show. We have a lot to
talk about with investors," Sinsheimer said.
The biggest development is a new law, which takes effect in
June and is aimed at easing the state's $100 billion unfunded
pension liability. Changes to pensions, including higher
retirement ages and the reduction and suspension of
cost-of-living adjustments for retiree pension payments, are
expected to save Illinois $160 billion over 30 years.
Illinois teachers, school administrators and retirees have
filed class-action lawsuits seeking to void the law, claiming it
violates state constitutional protections for public retirement
The continued failure to address the pension problem led
credit rating agencies to hammer Illinois' bond ratings to the
lowest levels among states. Investors, meanwhile, have demanded
heftier yields for the state's bonds.
Illinois' so-called credit spread narrowed in the latest
week to 130 basis points from 145 basis points over Municipal
Market Data's benchmark yield scale for triple-A-rated debt due
in 10 years. Still, the state continues to have the widest
spread after Puerto Rico among major municipal debt issuers
tracked by MMD, a unit of Thomson Reuters.
Sinsheimer said investors will also be told about the
state's recent three-year budget forecast. Projections released
by the state earlier this month indicate growing deficits
starting in fiscal 2015 due largely to the partial expiration of
income tax rate hikes enacted in 2011, effective Jan. 1, 2015.
Personal income tax revenue is expected to fall by $1.7
billion and corporate tax collections are forecast to drop by
$325 million due to the expiration, although the
Democrat-controlled legislature could vote to extend the full
The state sold $350 million of taxable GO bonds on Dec. 12,
just a week after Governor Pat Quinn signed the pension reforms
Illinois was the fourth-biggest debt issuer in the U.S.
municipal market in 2013, selling $3.35 billion of bonds,
according to Thomson Reuters data.