State of Illinois



General Obligation Bonds, Series of November 2017A,B,C,D

October 26, 2017


Image by Sam Mgrdichian

Illinois sells largest bond issuance since 2003

Siebert Cisneros Shank was selected to serve as one of six joint-senior underwriters for the $6 billion State of Illinois General Obligation bonds Series of November 2017A,B,C and D. $1.5 billion bonds were sold competitively in three separate tranches on October 17th, and $4.5 billion negotiated bonds were sold a week later.

The structure consisted of 12 equally-sized maturities of $500 million from 2018 through 2029. Transaction proceeds paid a portion of the State’s past due invoices incurred prior to July 31, 2017, and totaling $15.1 billion. This was the State’s largest issuance since its $10 billion 2003 Pension Obligation Bond issuance.

SCS takes lead in structuring. SCS led the quantitative analyses, bond structuring, provided scenario analyses, and compared costs of utilizing the State’s GO or PIT credits or a combination of both. We also explored other structuring alternatives to attract the broadest investor participation, such as short call, taxable options for select maturities and insurance break-even analyses. We quantified costs of taxable alternatives on a maturity-by-maturity basis in addition to analyzing placement of competitive maturities, the value of sealed bids and their potential impact on the negotiated transaction—how to set an effective pricing benchmark.

We also provided input on documentation and collaborated with other joint-senior managers through the State’s FA to develop an investor outreach program and marketing strategy.

Our firm consistently recommended short competitive maturities and a conventional structure with a 10-year par call, which the State ultimately adopted. We also provided market data, detailed investor analyses in the weeks leading up to pricing and investor feedback to the State and its FAs.
The competitive sales achieved tight pricing spreads at +70 bps, +69 bps, and +165 bps off AAA-MMD for maturities 2018, 2019 and 2029, respectively.

Following the competitive transaction, the Treasury market weakened in response to the prospect of a federal budget resolution, tax reform, higher inflation and federal deficit. On the day of pricing, despite low supplies, municipals continued to cheapen following treasury with the 10-year yield rising to 2.44%, the highest since May 11th.

SCS’s Underwriting Commitment. SCS placed $151 million in initial orders, including $1 million in priority orders. We underwrote approximately $60 million of unsold balance ($15 mm member order plus 10.5% of the $422.475 mm final syndicate balance).