Bonds News

Low-rated Illinois launches search for bond underwriters

CHICAGO, July 6 (Reuters) - Shortly after enacting a temporary budget, Illinois is seeking a team of underwriters to handle bond sales over the next three years, according to a notice on the state’s procurement website.

The notice, posted on Friday with responses due on July 22, seeks to qualify as many as 30 firms as senior, co-senior and co-manager underwriters for an unspecified amount of bond issuance.

Illinois has the worst general obligation bond ratings among the 50 states at the low investment grade triple-B level due to its $111 billion unfunded pension liability, chronic structural deficit, and a budget impasse that was put on hold last week with the passage of a six-month spending plan.

The budget deal includes authorization to refund up to $2 billion of bonds to save about $20 million. It also marked a truce in the battle between Republican Governor Bruce Rauner and Democrats who control the legislature, who put aside their differences so that the fifth-largest U.S. state could fund some operations at least through the Nov. 8 general election.

So far this year, Illinois sold $1.03 billion of GO bonds in two competitively bid deals that resulted in wide so-called credit spreads over Municipal Market Data’s benchmark triple-A yield scale.

State law limits the use of underwriters in a negotiated debt issuance to no more than 75 percent of the par amount of bonds sold each fiscal year.

The state’s last solicitation for underwriters was in 2013 with firms that included Citi, Wells Fargo Securities, J.P. Morgan, Barclays Capital, Morgan Stanley, Bank of America Merrill Lynch, and Loop Capital Markets, tapped as rotating senior underwriters.

Reporting by Karen Pierog and Matthew Lewis