Illinois Agency OKs $2.5 Billion

CHICAGO — The Illinois Finance Authority yesterday approved more than $2.5 billion of financings, including $1 billion for health care borrowers, $1 billion for a freight transfer center, and $175 million for schools to compensate for state aid payments that won’t go out this week if a new budget is not approved. The board rushed through the approval of an up to $175 million note or bank-line-of-credit financing under what is being called the Local School District Notes Program to comply with a recently received request from Gov. Rod Blagojevich’s office. The financing would provide interest-free loans to school districts that apply through the state Board of Education for assistance in the event Illinois lawmakers fail to reach an agreement on a new budget for fiscal 2008 this week. About $170 million in state aid payments are due out, but state Comptroller Daniel Hynes said he needs budget authorization by today to send them. State lawmakers are close to reaching an agreement on a new operating budget and possibly a new capital program, but there are no assurances it will come this week. The program raises several significant questions for the IFA. First, Blagojevich announced that districts could borrow at no cost, yet legislative approval would be needed to cover interest on any financing or loan or the IFA could get stuck covering the cost. Second, the IFA would need to tread cautiously and have some certainty that the proceeds would be used, given the scrutiny pooled bond programs face from the Internal Revenue Service. “There are many details to work out and we are hopeful that this program will not be needed,” IFA spokeswoman Diane Hamburger said. Board member Terrence O’Brien voted against the note program saying the governor and lawmakers should instead approve a new budget. The most expensive project on the agenda comes from CenterPoint Properties Trust for its Joliet Terminal Railroad LLC project. The for-profit company received preliminary approval from the IFA board for the project that relies on an allocation of tax-exempt, private-activity bonding from the U.S. Department of Transportation under its $15 billion pilot program established in 2005 that provides assistance for private intermodal rail transfer parks, toll roads and bridges. Federal DOT authorities are reviewing a handful of applications under the program. Two so far have received approval. “We are betting a big part of our future on intermodal” transfer facilities, said CenterPoint’s general counsel Daniel Hemmer. The company plans to build a new 3,400 acre intermodal transfer park in unincorporated Will County, near Joliet and Elwood, just a couple miles from its existing facility that is currently the largest such rail transfer site in the country. The new facility would be located near the Union Pacific mainline and will eclipse the existing 2,200 park that serves the Burlington Northern Santa Fe Railroad. CenterPoint also operates an intermodal center in Rochelle, Ill. The inducement resolution — which paves the way for the company to apply to federal authorities for the allocation — would permit the issuance through the IFA of up to $1.1 billion of tax-exempt freight transfer facilities revenue bonds. The project marks the third to come before the IFA under the federal pilot program. A previous application from CenterPoint for $505 million in financing for its Crete Terminal Railroad LLC project received preliminary approval in March and the company was the first to submit an intermodal transfer facility application to the federal government this past spring. A decision is expected at any time. The IFA board gave preliminary approval to Ridge Property Services LLC’s $591 million request last August for a rail transfer facility near Wilmington. All three applications would return for final approval after U.S. DOT approves them. CenterPoint is also seeking federal grants to help finance its two projects. Intermodal facilities are designed to provide for the efficient and direct transfer of goods between ship, rail or truck, in effect serving as an inland port. Chicago currently serves as the largest inland port/freight transfer center nationally. CenterPoint officials said they anticipate issuing the debt for the second project over a period of about five years using a floating rate structure backed by a letter of credit. The lending syndicate that the company is negotiating with includes Bank of America, JP Morgan Chase Bank, National City Bank and Wachovia Bank NA. The company is also talking with the broker-dealer subsidiaries of those banks about underwriting the deal and they intend to interview other Wall Street firms with expertise in transportation finance. Perkins Coie LLP is bond counsel. CenterPoint is a real estate investment trust and claims to be the largest owner, manager, and developer of industrial real estate in metropolitan Chicago. The 20-year-old company originally was publicly traded as a REIT, but went private last year in a $3.4 billion cash deal with the California Public Employees Retirement Trust and LaSalle Investment Management, a division of Jones Lang LaSalle Inc. The IFA board also gave approval to $1 billion worth of health care financings. The largest came from Oak Brook, Ill.-based Advocate Health Care Network which plans to sell up to $520 million of debt including $200 million of new money bonds for projects at its seven acute care hospitals and $300 million of refunding bonds. The refunding piece will restructure some existing debt pushing out bonds now set to mature in nine years by another decade. “This will allow Advocate to lower our debt service payments and in turn have greater resources” to spend on care, said Advocate chief financial officer Dominic Nakis. Structural details are still being worked out. The system carries ratings in the low, double-A range to the mid-double-A range from all three raters. Citi is the underwriter and Chapman and Cutler LLP is bond counsel. Nakis said the system hopes to enter the market this fall after it returns to the board for final approval. Hoosier Care Inc. won preliminary approval for the sale of up to $40 million of new money and refunding bonds with the new money financing projects at its facilities in Illinois and Indiana. The deal would mark the IFA’s first under newly-approved state legislation authorizing it to provide conduit assistance for projects outside of Illinois as long as some entity associated with the borrower is located in Illinois. The governor is expected to sign the legislation by the end of the month. Bergen Capital is the underwriter of the unrated debt and Ice Miller LLP is bond counsel. Sherman Health System received preliminary approval to sell up to $325 million of debt that includes $130 million to refund bonds sold in 1997 and $155 million of new money to fund construction of a 255-bed replacement hospital in Elgin. The hospital initially planned an interim financing last year, but litigation filed by Provena Health contesting the validity of its hospital certificate of need award from the Illinois Health Facilities Planning Board delayed that financing. A Circuit Court of Cook County judge rejected the challenge and affirmed the CON last month. The board gave final approval to the sale of up to $150 million of new money debt by Lincolnshire-based Sedgebrook Retirement Community to finance the completion of a retirement village under construction and for the not-for-profit’s purchase of it. An unrated, floating rate piece for $40 million would carry a letter of credit while $105 million of unrated bonds would be sold at a fixed rate with Ziegler Capital Markets serving as underwriter.