Chicago opened and closed November with billion dollar deal for O’Hare International Airport.

CHICAGO – Chicago wrapped up its second billion-dollar airport deal within a month at a price that displays how much the market has changed in that short time.

On Wednesday, the city's single-A rated $1.1 billion new money O'Hare International Airport general airport revenue bonds priced as the market opened with the 10-year triple-A benchmark at 2.47% to 2.49%.

A week before the Nov. 8 election, the city priced its $1 billion O'Hare GARB refunding with the Municipal Market Data benchmark at 1.70%.

In addition to the market's higher overall rates, O'Hare in Wednesday's pricing saw its spreads widen to the MMD top benchmark and to the single-A.

A 10-year maturity in a series not subject to the alternative minimum tax landed at a yield of 3.27%, 78 to 80 basis points over the MMD top benchmark at market open and 24 basis points over the MMD single-A.

The MMD 10-year rose to 2.52% at the market close Wednesday from 2.45% when the market closed Tuesday while the yield on the 30-year rose 10 basis points to 3.26% from 3.16%.

In the city's $1 billion GARB refunding before the election, a 10-year on a non-AMT series landed at a yield of 2.28%, 58 basis points over the triple-A benchmark and just 6 basis points over the single-A benchmark. A 2041 maturity was priced to yield 3.23%, 75 basis points over the triple-A benchmark and 18 basis points over the single-A. Longer maturities on the new money deal were difficult to compare to the refunding because they offered varying coupons of 4.25% and 5.25% which impacted the yields.

Bank of America Merrill Lynch ran the books on the refunding and Morgan Stanley had the books on the Wednesday sale.

"Muni market problems compounded by bearish reversal in treasuries as OPEC surprised markets with oil production cut deal that sent oil from the $45 handle to the $49 handle," MMD wrote in its closing commentary. "Muni underwriters provided shockingly wide spreads to entice buyers and it wasn't just the negotiated loans. Competitive sales came with ample concessions too."

The city sought to highlight that the deal was 2.4 times oversubscribed and drew 126 investors and traders said strong interest in the deal helped the underwriting team reprice yields lower on some maturities. The true interest cost landed at 4.48%.

While the spreads widened between pricings, they still remain tighter than the city saw on its October 2015 when it sold a $2 billion airport issue. That spread to MMD triple-A was 124 basis points on the 25-year bond with spreads on shorter maturities in the 90 basis point range. The spread to a single-A credit on the 2040 bond was 62 basis points.

While steep penalties are also imposed on Chicago's general obligation bonds, revenue-backed credits tied to enterprise systems like its airports have fared better. O'Hare paper benefits from the airport's own strengths and improved market perception of the city's finances. The bonds also offer extra yields but face more limited exposure to the city's pension and budget struggles as its airports are operated as enterprise systems.

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