Illinois sold $1.775 billion of general obligation bonds Tuesday in six series, and state officials were pleased with the results.
Paul Chatalas, director of capital markets for the state, said in a statement it was "a successful day in the bond market," and the six series of bonds drew "aggressive bids."
Investor demand "exceeded market expectations, which drove down borrowing costs for taxpayers and reflects the growing confidence in Illinois' fiscal stability," Chatalas said.
Fitch Ratings and S&P Global Ratings assigned an A-minus rating with a stable outlook to the bonds. Moody's Ratings rates them A3 with a positive outlook.
Bond proceeds will fund accelerated pension payments and major capital projects.
"We were very pleased with the timing of this transaction," a spokesperson for the Governor's Office of Management and Budget said by email. "By coming to market during a relatively calm period leading into Labor Day, Illinois was able to capture the full attention of investors and underwriters without the added noise that market volatility can create."
Additionally, with Federal Reserve rate cuts expected imminently, "the state benefited from lower rates at the front end of the yield curve," the spokesperson added.
"We're grateful to investors who continue to place their trust in Illinois and we appreciate the bids from the banks who represent them," Chatalas said.
The GOMB spokesperson noted the Series 2025A bonds, which will fund accelerated pension contributions, "reflect Illinois' continued dedication to supporting the state's pension obligations" and underscore a commitment to responsible debt management.
"The issuance is a concrete example of how we are prioritizing pension funding while taking advantage of favorable market conditions," the spokesperson said.
In addition to flagging the state's structural imbalance stemming from pension underfunding, rating agencies noted spending pressure, which Fitch said is due to its elevated long-term liability position and relatively slow economic growth.
Moody's said more timely releases of the state's Annual Comprehensive Financial Report could factor into a higher rating.
The GOMB spokesperson said the state has already taken steps to expedite the releases of future ACFRs, such as creating an ACFR Internal Control Unit within GOMB. The unit works with state agencies and provides technical guidance on best practices.
For the fiscal year 2025 ACFR, the state's auditor general will also transition to conducting audits at the statewide level rather than agency by agency, the GOMB spokesperson noted.
Moody's also said efforts to shore up reserves or fund balance could support a higher rating.
"We appreciate Moody's positive outlook and see it as recognition of our ongoing efforts to strengthen the state's financial position," the spokesperson said. "Illinois' fund balances have continued to grow … including ending fiscal year 2025 with nearly $5.5 billion in cash in the general funds, of which nearly $2.4 billion was in the budget stabilization fund, an all-time high."
Chapman and Cutler and Hardwick Law Firm were co-bond counsel on the deal. Frasca & Associates was the state's financial advisor.
Illinois' deal made up
The $240 million of taxable Series 2025A bonds received nine bids and sold to Wells Fargo with a TIC of 4.55%, with all bonds priced at par. The $235 million of Series 2025B bonds received 10 bids and sold to Wells Fargo with a TIC of 2.7510%, with 5s of 9/2026 at 2.60% and 5s of 2030 at 2.85%, noncall.
The $235 million of Series 2025C bonds received 10 bids and sold to Wells Fargo with a TIC of 3.5324%, with 5.25s of 9/2031 at 3.07% and 5s of 2035 at 3.82%, callable 9/2034. The $355 million of Series 2025D bonds received eight bids and sold to BofA Securities with a TIC of 4.5244%, with 5s of 9/2036 at 4.05% and 5s of 2040 at 4.60%, callable 9/2034.
The $355 million of Series 2025E bonds received seven bids and sold to J.P. Morgan at a TIC of 5.0280%, with 5s of 9/2041 at 4.80% and 5s of 2045 at 5.10%, callable 9/2034. The $355 million of Series 2025F bonds received seven bids and sold to J.P. Morgan Securities with a TIC of 5.2125%, with 5.25s of 9/2046 at 5.10% and 5.25s of 2050 at 5.20%, callable 9/2034.
