Mayor Brandon Johnson and the City Of Chicago Announce $1.5 Billion Refinancing Plan to achieve $110 Million in Debt Savings
illi News/10280722

CHICAGO ~ Chicago's Finance Committee has recently given the green light for the City to issue $1.5 billion in General Obligation (GO) bonds and for the Sales Tax Securitization Corporation (STSC) to issue STSC bonds. This ordinance, which was approved by the committee, will allow for the refinancing or tendering of certain outstanding City GO bonds and STSC bonds.

According to current market conditions, this combined refinancing and tendering is expected to generate approximately $110 million in present value savings. The STSC, which was established in 2017, has higher bond ratings than the City's GO bonds. Its primary purpose is to refinance GO bonds and further reduce the City's debt service costs.

The proposed $1.5 billion GO/STSC ordinance will be presented to the City Council on Wednesday, October 9, 2024. It follows responsible debt management practices and specifies that the entire amount can only be used for cost-saving refinancing purposes. Any other use of bond proceeds would require an amendment passed by the City Council. Additionally, these funds cannot be used for operating costs. While up to $1.5 billion in bonds is authorized, the City will only issue as much as necessary to achieve debt service savings.

More on illi News

• Heartfelt Dreams Foundation Launches Campaign to Build CHD Hospital
• Radarsign Tackles Intersection Safety with Launch of Grid-Free Solar LED Stop Sign
• Miami Real Estate Agent Drastically Increases Interest In Homes
• Adostics & Genmega Announce the Introduction of A-POD
• LIB and Nidec Rejoin Forces for Giant TH-0098 Temperature Humidity Test Chamber

Mayor Brandon Johnson expressed his commitment to finding innovative and responsible solutions to Chicago's financial challenges while prioritizing long-term stability in the budget. He believes that this refinancing plan is a crucial step towards creating a stronger financial foundation for all Chicagoans.

The process of refinancing is similar to a homeowner refinancing their mortgage - new bonds with lower interest rates will replace existing higher-interest bonds in order to save costs. On January 1, 2025, $850 million of the City's GO bonds will become callable and eligible for refinancing through a call action. Additionally, approximately $500 million of GO and STSC bonds will be purchased through a tender process and refinanced for savings. This will result in replacing outstanding debt with an average interest rate of 5.62 percent with new debt at a much lower cost of around 3.75 percent.

The City has successfully executed several refinancing efforts in the past, including separate ones for Midway Airport, the wastewater system, and the water system earlier this year. These were all done to achieve cost savings for their respective City enterprises.

The refinancing plan is still pending approval from the City Council. If approved, the City and STSC anticipate issuing the bonds as early as late October 2024. It is worth noting that over 40 percent of minority underwriter representation is targeted for this GO/STSC refinancing transaction, which is consistent with previous transactions.

---

Show All News | Report Violation