CHICAGO – The Chicago Park District paid a steep yield penalty for its Chicago ties on a recent sale although it managed to trim spreads from its 2015 issue.
The yield on the district's 10-year bond in a limited tax general obligation-backed series landed at 2.81% with a 5% coupon, 109 basis points over the Municipal Market Data's AAA benchmark, and 87 basis points over the AA. The 10-year on an unlimited tax GO landed at 2.88%. The 24-year maturity landed at 3.65% with a 5% coupon, 116 basis points over the AAA and 90 basis points over the AA.
Cabrera Capital Markets ran the books with PNC Capital Markets as co-senior manager for the $94.8 million pricing on Oct. 26. Sycamore Advisors LLC was lead advisor and Speer Financial Inc. was co-advisor.
The district is rated AA-minus by Fitch Ratings, AA by Kroll Bond Rating Agency, and AA-plus by S&P Global Ratings. Moody's Investors Service which was not asked to rate the new bonds assigns a junk rating to the district's past issuance due to its close governance link to junk-rated Chicago. The district has $800 million of debt.
The park district's last sale in September 2015 came after a downgrade and disclosure that its pension reforms were being threatened with a legal challenge following recent rulings tossing out city and state reforms.
The 25-year maturity in the 2015 sale landed at a 145 basis point spread. The 20-year maturities in that sale saw a yield of 4.38%, 150 basis points over the AAA scale. The pricing marked a big jump from a spread of 76 basis points in 2014.
The district tried to highlight in an investor presentation its solid operating results in recent years that have helped ease the burden of funding higher pension contributions under reforms negotiated with unions. The reforms that took effect early last year later became the subject of a legal challenge. The district is governed by a board appointed by Mayor Rahm Emanuel but operates independently of the city.
The deal came as negotiations are ongoing in an attempt to settle a pension lawsuit and reach a "modified approach to pension relief," according to the offering statement. The district currently has $517 million of unfunded liabilities for a net funded status of under 50%. If all the reforms are thrown out the district's net pension liabilities would rise by $111 million, the offering statement warns.
The district operates 585 parks, 231 field houses, Soldier Field stadium, and 26 miles of lakefront property that house a handful of cultural institutions including the Museum of Science and Industry, Field Museum of Natural History, DuSable Museum of African American History, Adler Planetarium, John G. Shedd Aquarium, and the Art Institute of Chicago.
