CHICAGO — Illinois' $300 million sale of high-grade taxable, sales-tax backed paper drew 11 bids all within a tight 19 basis point range, state officials said Thursday after the sale.
Wells Fargo won the bid with a true interest cost of 3.286%. Citi followed with a TIC of 3.298%. The spread between the high and low bids came within 19 basis points.
"The bids were pretty tight and we were very pleased with the results," said state capital markets director John Sinsheimer.
Yields ranged from 0.30% on the first maturity to 3.88% on the final maturity in 2037. The 10 year maturity paid a yield of 2.60%, almost 80 basis points over a 10-year Treasury yield of 1.82% Thursday.
The state's sales-tax backed bonds carry a AAA from Standard & Poor's and a AA-plus from Fitch Ratings. While the bonds typically have been subject to some interest rate penalty for the Illinois name, the high ratings shield them from the steeper penalties investors impose on the state's general obligation paper rated in the low-to-mid single A category.
"It's a highly rated bond that is well understood by the market," Sinsheimer said. The state's sales tax bonds — established under its Build Illinois capital program — benefit from strong coverage of about 25 times and limitations on additional issuance based on debt service coverage.
The TIC on $350 million of taxable GO paper that sold last month was 4.97% with the state's 10-year bond paying a yield of 4.31%, 245 basis points over the 10-year Treasury rate of 1.86% at the time of pricing.
The 25-year GO taxable bond last month paid a yield of 5.52% compared to Thursday's sales tax-backed 25-year bond that paid a yield of 3.88%.
Chicago-based Mesirow Financial Inc., which typically has participated on past state competitive sales as a member of syndicates, submitted a bid on its own. "We appreciated the bid from a local firm like Mesirow," Sinsheimer said.
Public Financial Management Inc. advised the state. Mayer Brown LLP and Hardwick Law Firm LLC served as bond counsel. Proceeds will fund capital projects, some which don't qualify for tax-exempt financing.
The state is working on a roughly $600 million sales-tax refunding and a $1 billion new-money GO sale both expected to sell in late spring or early summer, Sinsheimer said.