Welcome to Muni Minute, a new Bond Buyer weekly video series examining, in 60 seconds, a top story municipal bond market participants should have on their radars for the coming week. In our first installment, we look at this week's planned $875 million Chicago Public Schools general obligation bond sale amid credit rating downgrades, state takeover talk, and an ongoing financial crises that may cost the Board of Education dearly in yield penalties.
VOICE OVER: Chicago's called the Windy City, but there is an ill wind that's been blowing off the Board of Education's upcoming bond sale. Amid raging downgrades, state takeover talk, and a cash crunch, the Chicago public schools is selling 875 million of general obligations bonds. The Board of Ed faces a $1 billion budget deficit and officials see layoffs as a strike by teacher's union.
Meanwhile, State Republican lawmakers are trying to take over the city schools. While that's unlikely to happen, it adds to uncertainty over the credits. Ahead of the sale, S&P cut the CPS two notches to B-plus, while Fitch chopped its rating by three, also to B-plus. The schools get the highest marks from Kroll, which gives the board of Ed a grade of BBB. The sale comes on the heels of offerings from the city of Chicago and the state of Illinois.
Bond deals that saw issuers take yield penalties due to their own financial difficulties, but while CPS will take even heavier hits, traders seem to see the bonds finding a home on the high yield books. JP Morgan which released the structure last week, is set to price the issue on Wednesday.
I'm Chip Barnett and this has been your Muni Minute.