CHICAGO – The Illinois Finance Authority is readying an up to $175 million issue that will mark the first borrowing under an expanded $1 billion state revolving fund loan program.

The sale comes nine years after the state’s last SRF issue.

Gov. Pat Quinn last year announced the Clean Water Initiative, which expanded the program to $1 billion from $300 million program. The program is promoted as both an affordable means for local governments across the state to overhaul the state’s aging clean water and wastewater infrastructure and create jobs.

The IFA is managing the financing with the Illinois Environmental Protection Agency continuing to administer the loan program.

“Over time, this important public infrastructure finance program will do three things: save local taxpayers’ money; create an estimated 28,000 jobs both permanent jobs and unionized construction jobs; and ensure access to clean, safe drinking water to the citizens of Illinois,” IFA executive director Christopher Meister said.

The IFA board approved an up to $175 million borrowing at its meeting Tuesday. Proceeds of the issue will refund outstanding bonds, fund new loans, and provide a state program match that enables the state EPA to leverage federal funds for new loans.

The IFA and its SRF advisor, Public Financial Management Inc., is reviewing what portion of the state EPA’s $2.38 billion loan portfolio will be pledged to the new bonds in order to achieve top credit marks from Fitch Ratings and Standard & Poor’s.

Bank of America Merrill Lynch is the senior manager and Loop Capital Markets LLC and Ramirez & Co. Inc. are co-managers. The firms were drawn from pools previously established by the state after a competitive selection process.

Five firms were selected for the senior manager pool including Bank of America, JPMorgan, Morgan Stanley, Goldman Sachs, and Citi.  Another eight firms were placed in a co-manager pool. Katten Muchin Rosenman LLP is bond counsel.

The IFA last issued SRF bonds in a $130 million issue in 2004. Its predecessor agency, the Illinois Development Finance Authority, launched the first borrowing to fund SRF loans in 2002 with a $150 million sale.

The state revolving fund was first established in 1989 and has provided more than $3.6 billion in loans. In 2012, the SRF programs received 447 pre-applications with total project costs totaling nearly $2.3 billion. The biggest borrower of the revolving fund at the time of the 2004 deal was the triple-A Metropolitan Water Reclamation District of Greater Chicago.

The board at its monthly meeting also advanced the sale of up to $45 million of bonds for the Washington and Jane Smith Community in Orland Park, which does business as Smith Crossing. The proceeds will refund outstanding debt and repay a construction loan that funded an expansion. The continuing care retirement community anticipates structuring the bonds as an unrated private placement purchased by FirstMerit Bank and First Midwest Bank. Jones Day is bond counsel and Starshak Winzenburg is advisor.

The IFA board also advanced Benedictine University and Founders Woods, Ltd.’s plan to sell up to $70 million of bonds to refund debt and help finance construction of a new academic building on the university’s main campus in the Chicago suburb of Lisle. Founders Woods is a special purpose affiliate that owns student housing.

The university carries ratings of BBB from Standard & Poor’s. One series will refund outstanding debt and will be publicly offered. George K. Baum is the underwriter. Ice Miller LLP is bond counsel.

A second series with a mix of refunding bonds and new-money to fund the building construction will be directly purchased RBS Citizens NA and First Midwest Bank. The series could eventually be converted to a bank letter of credit structure that would be reoffered.

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