* I love the Bond Buyer. I just don’t always fully understand it…
Illinois came to market Tuesday, earlier than expected, with yields lowered by as much as 25 basis points from price talk Monday, as investor demand for high-yield paper welcomed the lowest-rated U.S. state. New deals from Oregon also re-priced to lower yields and New York State sold tax-exempt and taxable general obligation bonds in the competitive market to strong demand.
Triple-A benchmarks were little changed in mixed trading as the primary did the talking. U.S. Treasuries rose ahead of the Federal Reserve’s FOMC meeting conclusion Wednesday while equities lost ground.
Investors sitting on the sidelines in the secondary since Friday got a sense of what the primary had to offer and new deals were easily digested and underwriters bumped levels with the state of New York selling exempts through triple-A levels.
A repricing of Illinois general obligation bonds saw bonds bumped by 12 to 20 basis points from preliminary pricing wires Tuesday and 17 to 25 basis points from Monday’s price talk.
Morgan Stanley & Co. priced $1.25 billion of general obligation bonds for the State of Illinois (Baa3/BBB-/BBB-/). Bonds in 2022 with a 5% coupon at 0.69% (~63 basis points above triple-A benchmarks), 5s of 2026 at 1.51% (+108), 5s of 2031 at 2.22% (+102), 5s of 2036 at 2.47% (+119), 4s of 2041 at 2.81% (+132), 5s of 2046 at 2.75% (a 25 bps bump from Monday and about +111 bps). The second two series, $150 million priced with 5% coupons in 2022 to yield 0.69%, 1.51% in 2025, and 1.70% in 2031. The $258 million priced with 4% coupons in 2022 at 0.69%, 2025 at 1.30% and 2031 at 2.22%.
Maybe Google Translate needs to add a Bond Buyer function. Any help?
*** UPDATE 1 *** OK, this helps. Paul Chatalas, Director of Capital Markets, State of Illinois…
“The State received such strong demand and investor confidence that the bond sale was accelerated. Illinois received very impressive results, including more than 700 orders from more than 130 different investors, including respected names that have not invested in the State for a decade. This led to a contraction of credit spreads to 115 basis points over the benchmark in the longest maturity, the lowest in several years. Investors recognize the State is emerging from a period of unprecedented turbulence due to a global pandemic, and the bond market recognizes the fundamental security of the State’s bonds. The State appreciates the heavy subscription from long-time holders of its bonds, and welcomes the new investors that Illinois is seeing.”
Background…
Today the State of Illinois sold three series of tax-exempt General Obligation Bonds totaling $1.25 billion, to provide funding for capital projects, including projects authorized under the Rebuild Illinois capital program, for accelerated pension payments pursuant to the state’s ongoing pension buyout program and for refunding.
The Rebuild Illinois capital program, enacted in 2019, is the largest infrastructure program in the State’s history and the first in nearly a decade. The historic Rebuild Illinois capital plan passed with bipartisan supermajorities to improve the State’s infrastructure and improve economic development. The plan will invest $45 billion in roads, bridges, railways, universities, state facilities and other projects, creating and supporting an estimated 540,000 jobs over the life of the plan and revitalizing local economies across the state.
The pension benefit acceleration program allows program participants to receive an accelerated lump-sum payment in lieu of the right to receive future pension payments. With today’s issuance of $100 million, a total of $750 million of the authorized total of $1 billion pension acceleration bonds will have been issued.
The $850 million tax-exempt Series of March 2021A Bonds mature in 2022 through 2046 and funds capital projects and the pension acceleration program.
The $150 million tax-exempt Series of March 2021B Bonds mature in 2022 through 2031 and fund IT projects, which by statute may not have bond maturities that exceed 10 years.
The $250 million tax-exempt Series of March 2021C Bonds mature in 2022 through 2031 and are refunding bonds expected to save the State of Illinois $21.8 million, or 8 percent savings on a present value basis.
The G.O. Bonds were offered in three separate series in a negotiated sale, with an aggregate true interest cost of 2.90 percent. The bonds are being issued as fully exempt from federal taxation and are rated “BBB-” negative outlook by Fitch Ratings, “Baa3” negative outlook by Moody’s Investors Service and “BBB-” stable outlook by S&P Global Ratings.
The bond financing was led by Morgan Stanley & Co. LLC, with Co-Senior Managers Cabrera Capital Markets LLC, J.P. Morgan, Siebert Williams Shank & Co., LLC, and Stifel. Co-Managers were Blaylock Van LLC, Mischler Financial Group Inc., North South Capital, Podesta & Co. and Rice Financial Products Company.
*** UPDATE 2 *** From our favorite Bond Buyer reporter…
