illi News - City of Chicago Ends Interest-Rate Swap Program

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CHICAGO ~ Chicago Successfully Terminates Last Interest Rate Swaps, Demonstrating Commitment to Financial Safety and Stability

The City of Chicago has announced the successful termination of its last interest rate swaps, marking a significant step towards financial safety and stability. This decision comes after the Government Finance Officers Association (GFOA) advised local and state governments to exercise caution in using swaps and other debt-related derivative products due to their complex and often misunderstood financial risks.

Mayor Brandon Johnson expressed his satisfaction with the termination, stating that it not only reduces risk in the city's debt portfolio but also demonstrates their commitment to protecting its interests for future generations. He emphasized the importance of being proactive in identifying market opportunities to strengthen Chicago's fiscal position while generating long-term savings.

The use of interest rate swaps by the City dates back to 2004 when it issued variable-rate bonds and entered into these swaps to create fixed-rate debt payments. However, this exposed them to financial risk. In light of this, the City proactively identified favorable market conditions and made the decision to terminate these swaps and refund the bonds. This move is expected to ensure a safer and stronger financial future for Chicagoans.

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City of Chicago CFO Jill Jaworski highlighted that favorable market conditions have also allowed them to terminate the swaps with positive present value savings and over $7.4 million in cash-flow savings. With this termination, the City no longer has any derivatives exposure.

On March 13th, the City sold $79.525 million of Chicago Midway Airport Senior Lien Airport Revenue Refunding Bonds Series 2024A and 2024B. These bonds will refund $89.475 million of Chicago Midway Second Lien Airport Revenue Bonds Series 2004C and 2004D. On the same day, they also terminated the Swap Agreements associated with these bonds, settling both transactions today.

This strategic financial maneuver is part of the City's ongoing commitment to optimize the airport's capital structure and support its continuous improvement and service to airlines and passengers. It aligns with Midway's long-term vision and operational needs, which is especially crucial as the airport experiences recovery and growth, with passenger bookings exceeding pre-COVID levels.

The termination of interest rate swaps by the City of Chicago is a significant step towards financial stability and demonstrates their commitment to protecting the city's interests. With this move, they have reduced risk in their debt portfolio and capitalized on market opportunities to ensure a safer and stronger financial future for Chicagoans.

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