CHICAGO — The Chicago City Council is expected today to approve the sale of up to $2 billion of new-money and refunding bonds in three general obligation and revenue-backed issues planned over the next two months, including the largest ever to rely solely on minority-owned underwriting firms. The City Council’s Finance Committee advanced the three deals at a meeting yesterday ahead of the full council’s meeting today. The ordinances allow for up to $900 million of new-money and refunding water revenue bonds, up to $900 million of new-money and refunding GOs, and up to $250 million of new-money and refunding bonds secured by the city’s motor fuel tax. The city does not expect to tap the full authorization on the transactions.“These bond issuances will provide critical funds for important neighborhood projects, substantial savings in interest costs, and historic opportunities and leadership roles for minority-owned firms in Chicago,” chief financial officer Paul Volpe told committee members in his first appearance there seeking approval for city financings. Volpe, who previously served as the city’s budget director, was promoted by Mayor Richard Daley in June. Chicago anticipates issuing by the end of November $375 million of new-money water revenue-backed bonds to finance projects over the next three years and refunding another $100 million of outstanding water debt. Officials are also considering the conversion of another $100 of outstanding floating-rate bonds to a fixed rate. The refunding is expected to achieve $6 million in present-value savings.UBS Securities LLC is the senior manager and M.R. Beal & Co. is the co-senior manager. Alta Capital Group LLC, Gardner Rich & Co., Cabrera Capital Markets Inc., and Morgan Stanley are co-managers. Minority- and women-owned firms make up about 50% of the underwriting team. The motor fuel tax-backed bonds includes up to $100 million of new-money bonds to finance various transportation-related projects and at least $100 million of refunding bonds that should achieve $4 million in present-value savings. The deal is also expected to price before the end of November. Scott Balice Strategies LLC is serving as financial adviser.Citi is the senior manager, with Popular Securities Inc. as co-senior manager. Apex Pryor Securities, Jackson Securities LLC, and George K. Baum & Co. are co-managers, with minority-owned firms representing about 48% of the underwriting syndicate.The mostly refunding GO sale is also expected to sell before the end of November. Chicago hopes to refund at least $600 million of outstanding debt with $35 million in present-value savings expected. Loop Capital Markets LLC is senior manager and Samuel A. Ramirez & Co. is co-senior manager. Cabrera and SBK-Brooks Investment Corp. are co-managers. The deal is the first GO issue in the city’s history to use all minority-owned firms and the largest-ever city bond issue to do the same, Volpe said. Highlighting the strong level of minority participation on the transactions, Volpe and his finance team won praise from council members who closely watch the levels of black-, Latino-, and women-owned firms’ inclusion in all city business. Many council members are more frequently critical of the level of contracts awarded to those firms. The committee’s longtime chairman, Edward Burke, also noted the significance of the selections to lead roles, saying it proves firms are benefiting from the city’s efforts to help them grow and take “a new and important role as senior managers.”One council member suggested that the city do more to elevate minority-owned firms to the role of senior bond counsel, as the list on the upcoming deals include minority- and women-owned firms only in the role of co-bond counsel or co-underwriters’ counsel. The office of Chicago’s corporation counsel handles those selections.Volpe said he expects to close out 2007 having completed about 16 financings with 38% minority- and women-owned underwriting participation, an increase over last year’s record figure of 34%. The city has an ordinance that requires minority participation of 25% and women-owned participation of 5% on city contracts. Bond business is exempt from the requirement, although the Finance Department has always met that threshold since the ordinance was adopted more than a decade ago.Chicago’s GOs are rated in the low- to mid-double-A category, the motor fuel bonds are rated in the mid- to high-single-A category, and the water revenue bonds carry ratings in the single-A to double-A category. All the deals are expected to be insured.The city also expects to issue this November about $1 billion of new-money and refunding O’Hare International Airport-related debt to help finance the ongoing $7.52 billion runway reconfiguration and expansion project. The deal includes four series, including $600 million of new-money bonds secured by both general airport revenues and passenger facility charges. That portion is not expected to be subject to the alternative minimum tax because it is financing runways for general government purposes under federal tax rules.The deal also includes a refunding of about $120 million of outstanding first-lien passenger facility charge-backed debt, which the city will push to the second lien, achieving some savings and freeing up a debt service reserve. Another series would convert some outstanding O’Hare commercial paper to long-term debt and a final series would refund some outstanding second-lien PFC-backed bonds. Finance officials expect to update rating agency analysts next week on the O’Hare sale. Lehman Brothers is the senior manager on the transaction with Cabrera and JPMorgan co-senior managers. The city is using D&G Consulting as financial adviser.
