Tags: illinois | bonds | debt | yield

Yields Rise for Illinois' $4.5 Billion of Bonds to Pay Past Bills

Yields Rise for Illinois' $4.5 Billion of Bonds to Pay Past Bills
(Dollar Photo Club)

Wednesday, 25 October 2017 05:04 PM

Illinois completed a big debt issuance on Wednesday to pay off overdue bills, selling $4.5 billion of bonds to investors who demanded hefty yields from the lowest-rated state.

After an initial pricing, a team of underwriters repriced the general obligation bonds, boosting yields by 3 to 15 basis points, according to a pricing scale seen by Reuters. The top yield rose to 3.77 percent for bonds due in 2028 with a 5 percent coupon from a preliminary 3.74 percent. For bonds due in 2020, the yield climbed by 15 basis points to 2.53 percent.

The deal was the second part of a $6 billion debt issuance by the nation's fifth-largest state to raise money to help pay off a huge pile of overdue bills accruing late payment penalties of as much as 12 percent annually. Last week, Illinois sold $1.5 billion of bonds in competitive bidding with mixed results.

The $4.5 billion of bonds were offered at aggressively low yields before they were repriced, said Nicholos Venditti, a portfolio manager at Thornburg Investment Management, who did not participate in the deal.

"I think for Illinois this is still incredibly cheap money," he said, adding that the bonds should have fetched even fatter yields given the state's ongoing financial problems. An impasse between the Republican governor and Democrats who control the legislature left Illinois without complete budgets for an unprecedented two fiscal years and caused the bill backlog to balloon to record levels. As of Tuesday, it totaled $16.5 billion.

In July, the legislature enacted a fiscal 2018 budget that included the bond authorization, as well as an income tax hike over Governor Bruce Rauner's vetoes.

Wednesday's sale of bonds due in 2020 through 2028 widened Illinois' so-called credit spread over Municipal Market Data's benchmark triple-A yield scale for shorter-term debt and narrowed the spread for longer-term bonds, according to MMD. For bonds due in 2028, the spread eased to 164 basis points over the scale from 170 basis points.

Illinois' bonds were rated one notch above junk at Baa3 and BBB-minus by Moody's Investors Service and S&P Global Ratings, and two notches above junk at BBB by Fitch Ratings.

© 2021 Thomson/Reuters. All rights reserved.


StreetTalk
Illinois completed a big debt issuance on Wednesday to pay off overdue bills, selling $4.5 billion of bonds to investors who demanded hefty yields from the lowest-rated state.
illinois, bonds, debt, yield
359
2017-04-25
Wednesday, 25 October 2017 05:04 PM
Newsmax Media, Inc.
 
Newsmax TV Live

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved