CHICAGO — The Chicago Park District's steep yield premiums drew strong interest in the agency's Aug. 27 sale as the yield penalties nearly doubled on some maturities when compared to a June 2014 sale that carried the same published ratings.
While both issues carried the same double-A level ratings from three rating agencies, the district saw its ratings from Moody's Investors Service fall over the last year and it was dropped to a junk level in May primarily due to its governance links to Chicago. The city is struggling with massive pension woes straining its budget and considered a distressed credit.
Both deals carried published ratings of AA-minus by Fitch Ratings, AA by Kroll Bond Rating Agency, and AA-plus by Standard & Poor's. Prior to the 2014 sale, Moody's in March 2014 had lowered the district's rating two notches to A3 from A1. It was not asked to rate either last year's issue or this year's.
In other negative headwinds facing the park district's most recent sale, the district disclosed that its pension reforms are being threatened with a legal challenge following recent rulings tossing out city and state reforms.
The 20-year maturities in the sale Thursday offered 5 % coupons with yields of 4.38%, 150 basis points over the Municipal Market Data's AAA scale and 50 basis points over the BBB benchmark.
The spread on the 20 year maturity to the top-rated MMD benchmark showed a jump to 150 basis points from 76 a year earlier.
The 25 year was initially at 150 basis points over but strong demand resulted in a 5 basis point bump down in yield, according to the scale. Some other maturities saw three basis point changes in the issuer's favor to reflect pieces of the deal being oversubscribed by 1.5 times to four times.
The district's uninsured 20 year maturity in the 2014 sale yielded 3.92 %, 76 basis points over the MMD AAA and just 8 over the single-A benchmark. The 10-year was 2.88%, 54 basis points over AAA MMD.
BMO Capital Markets was the senior manager with Loop Capital Markets and William Blair & Co. co-seniors.