Illinois Governor Says Bond-Sale Timing Aims for ‘Best’ Rates

(Bloomberg) -- Illinois, the only U.S. state with a credit rating dangling one step above junk, is working to get “the best possible rates” for the more than $2 billion of debt sales that have been in the works over the past two weeks, Governor J.B. Pritzker said Tuesday.

Illinois delayed the planned auction of $1.2 billion of short-term debt last week in the face of record-high penalties being demanded by investors concerned about the hit being dealt to the government’s finances by the coronavirus pandemic.

Another $1 billion of general-obligation bonds are currently being marketed by underwriters led by Bank of America Corp. The sale, which was initially slated for as soon as Tuesday, is on day-to-day status and may not be priced until as early as Wednesday, according to data compiled by Bloomberg and a source familiar with the pricing.

“Everyday, you are trying to get the best bargain you can,” Pritzker said in a telephone interview, when asked about the delay. “We are going to continue to make sure that we get this bond issuance at the right price.”

The borrowing comes after Illinois’s bonds have tumbled sharply since March amid speculation that the steep economic slowdown may turn it into the first state to be stripped of its investment grade rating. Such a step would make many mutual funds unable to own its securities, sharply limiting the scope of the buyers it could sell to whenever it needs to raise cash.

Illinois 10-year bonds are yielding about 5.56%, more than four percentage points above benchmark securities, according to Bloomberg’s indexes. That’s well above what even Mexico and Brazil pay on their dollar-denominated debt.

Pritzker said the decision-making on the timing is “exactly appropriate” and the state is working with underwriters “to do the best we can and make sure we get the right and appropriate interest rate.”

“Certainly, we want to make sure we are working hard to get the bond issuance done but we’ve not seen a problem within the market,” Pritzker said.

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