CHICAGO - With a new chairman at the helm, the Illinois Finance Authority board yesterday gave preliminary approval to deals for the University of Chicagoand Alexian Brothers Health System, and also approved a restructuring of another health system's floating-rate bonds.
The board gave initial approval to the University of Chicago's plan to issue up to $125 million to current refund debt sold in 1998. The university would issue variable-rate bonds and entered into a forward swap agreement in 2005 in conjunction with the deal. The university will pay a fixed-rate of 3.19% to counterparty Merrill Lynch Capital Services that will pay 68% of the London Interbank Offered Rate. The current bonds carry rates between 5 and 5.25%.
The university is currently rated in the mid-to-high double-A category. Goldman, Sachs & Co. is the underwriter, Public Financial Management Inc. is the financial adviser, and Chapman and Cutler LLP is bond counsel.
Alexian Brothers presented its proposal to issue up to $55 million of new money to cover the costs of building and equipping a new tower at Alexian Brothers Medical Center in Elk Grove Village. The system, which operates three hospitals in the northwest suburbs of Chicago, intends to issue the bonds with a fixed-rate structure. Merrill Lynch & Co. is underwriter, Kaufman Hall & Associates is financial adviser and Jones Day is bond counsel. The system is currently rated A by Fitch Ratings and A3 by Moody's Investors Service.
The board also approved a restructuring of OSF Healthcare System's variable-rate demand bonds sold in 2001, 2005, and 2007 to add a letter of credit to the securities. The bonds carry insurance from Radian Asset Assurance Inc., which was downgraded to A-plus from AA last year by Fitch.
Gov. Rod Blagojevich this week announced his appointment of William A. Brandt to serve as chairman for a two-year term of the 15-member IFA board although he assumed the role last month.
"Bill Brandt understands how public investments can spark the kind of growth and opportunities that will benefit communities across our state for years to come," the governor said.
Brandt is the chief executive officer of Development Specialists Inc., which specializes in the turnaround, management, consulting and restructuring of companies.
The agency was created in 2004 in a consolidation of conduit authorities. The IFA was the second most active issuer in the Midwest last year on 85 transactions totaling $3.6 billion, according to Thomson Financial.
Brandt replaces attorney David Gustman, who was the IFA's first chairman and whose term recently expired. Gustman and the IFA's former executive director both had close ties to indicted businessman Antoin Rezko, who was once a top fundraiser and adviser to Blagojevich. Gustman is a neighbor of Rezko and his law firm Freeborn & Peters has represented Rezko on some business matters.
Ali Ata, the agency's former executive director, was a long time friend and associate of Rezko's. Ata was indicted last June on charges that he used his position at the helm of the IFA to assist Rezko in a fraudulent business deal by supplying Rezko with a letter on IFA letterhead aimed at inflating the worth of several restaurants, according to federal prosecutors. Ata has pled not guilty.
Last week, Ata's attorney, Thomas McQueen, said he would ask U.S. District Court Judge James Zagel to sever Ata's case from Rezko's and another defendant. Although Zagel did not set a trial date last week, he said he believed the trial could be completed before the end of the year.
Rezko is facing a trial next month on separate charges that he sought kickbacks from firms seeking to do investment business with the state. It was recently disclosed in federal documents that prosecutors had bank records showing that a $3.5 million wire transfer moved through accounts held by Gustman's Freeborn & Peters. Concerns over the transfer prompted a federal judge to revoke Rezko's bond and he remains in federal custody. q