The under-construction, bond-financed Marriott Marquis Chicago hotel is part of the Illinois Metropolitan Pier and Exposition Authority's new entertainment district.

CHICAGO — The Illinois Metropolitan Pier and Exposition Authority plans to enter the market this fall after revamping its hotel financing plan following rating downgrades triggered by the state's budget impasse.

The MPEA board approved the finance team at its meeting Tuesday. The agency will issue the remaining $153 million of its state-approved expansion project bonding authority in the upcoming sale.

The agency had previously planned to sell notes during the construction phase, redeeming them in 2017 with longer term bonds as part of the financing for the $390 million project.

"In order to provide certainty to the financing for the authority's hotel project, rather than issue bond anticipation notes during construction to be taken out by an expansion project bond issuance in 2017, MPEA will now issue the remaining $153.157 million of expansion project bond authorization," board documents said. "This transaction may also include a restructuring and a new money component as well."

Citi and Cabrera Capital Markets are joint bookrunning senior managers and Siebert Brandford Shank & Co. is senior manager. Public Financial Management Inc. is advising the authority. Katten Muchin Rosenman LLP is bond counsel and Charity & Associates is underwriter's counsel.

"Firms have been selected for this 2015 underwriting syndicate based on their knowledge and experience relative to the contemplated transaction, their understanding of the authority's overall debt program objectives, and MPEA's business diversity goals," documents said.

Gov. Bruce Rauner last week signed legislation that allows MPEA to make its debt payments even without a state budget in place. Market participants said they expect the legislation will help chip away at MPEA's recent 100 basis point spike in secondary market trading, but it won't restore the high-grade ratings lost after a technical default last month.

The legislation permits MPEA to draw from the account that holds pledged tax revenues to cover monthly payments to the bond trustee and also to make its December debt service payment. The agency requires an appropriation to do both and without a state budget in place it could not make the $20.8 million monthly payment due to the trustee July 20.

The failed transfer prompted Standard & Poor's to strip the agency's $3 billion of debt of its AAA rating and Fitch Ratings to lower its AA-minus rating. Both dropped the ratings to BBB-plus, one level below the state's A-minus rating, as they re-characterized the agency's debt as subject to appropriation risk.

The legislation frees up a total of $167 million in MPEA project funds needed for debt service in fiscal 2016. No further rating action is expected.

Fitch and Standard & Poor's previously recognized the strength of a mechanism that traps revenues, preventing their use elsewhere. Moody's Investors Service had already considered the credit an appropriation risk and rates the authority's debt Baa1 with a negative outlook, one notch lower than the state.

The authority's nearly $3 billion of bonds are backed by taxes on hotel stays, car rentals and other tourist services with statewide sales tax revenues allocated by statute to cover shortfalls between annual tourism tax revenues and debt service.

MPEA officials and Chicago Mayor Rahm Emanuel broke ground late last month on the Marriott Marquis Chicago hotel that will be part of the authority's new entertainment district that includes an arena that will serve as home to DePaul University's basketball team.

The 40-story, 1,206-room hotel will be located across from the MPEA-owned McCormick Place Convention Center and the existing 1,258 room Hyatt McCormick Place hotel. The city and MPEA is hoping to bolster the convention center's ability to draw midsize-to-large conventions and shows with the additional hotel.

"The Marriott Marquis Chicago will not only play a crucial role in maintaining Chicago's leadership in the industry, it will help anchor a concerted effort to revitalize the surrounding neighborhood through development of the McCormick Place Entertainment District," MPEA's chief executive officer Lori Healey said in the announcement of the groundbreaking.

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