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Illinois Seeks To Issue $8.75 Billion Bond To Pay Overdue Bills As Muni Issuance Market On Verge Of Shutdown
While Illinois' desire to finally tackle its unsustainable fiscal situation is admirable, the process is starting to disclose some very stinky rot below the surface. On the heels of the recent hike in the corporate tax rate, today Bloomberg reports that governor Pat Quinn is asking lawmakers to authorize an $8.75 billion bond sale. The use of proceeds? To pay $6 billion in backlogged bills: read invoices that the state has been unable to pay so far due to what technically should be classified as a liquidity crunch, and non-technically as complete lack of cash. Luckily, entities that are owed money by the state at least have a chance to get paid. Earlier, state House of Representatives defeated a borrowing bill that was designed to
eliminate the pile of invoices that is at least five months old. The state's payment delinquency also includes pension funds: local underfunded pensions are owed almost $4 billion in payments by the state. In the meantime, Chicago CDS dropped on the news of the tax hike, declining from 28 bps to 300 yesterday, the lowest since December 9. Whether this means that the state will be able to find sufficiently stupid investors whose capital will go to nothing besides funding overdue invoices, is a totally separate matter however. Perhaps a good indication of the ravenous appetite for muni debt (in addition to the fresh 52 week low in virtually every single muni bond fund), is that the New Jersey agency has shrank the size of a proposed $1.2 billion refinancing offering by roughly 40% and hiked yields on the sale as it struggled to market bonds to investors on Thursday. As the secondary muni market is plunging, the primary market for issuance is on the verge of shutting down completely. Cue in QE3.
From Bloomberg:
Illinois Governor Pat Quinn will ask lawmakers next month to authorize an $8.75 billion bond sale to pay $6 billion in backlogged bills.
The state House of Representatives defeated a borrowing bill in the final hours of the legislative session Tuesday that was designed to eliminate the pile of invoices that is at least five months old.
It was part of a package of measures that included a 67 percent increase in the personal income tax aimed at plugging a $13 billion budget hole amid the state’s worst financial crisis. Legislators are to return to Springfield next month.
“We still anticipate getting the debt restructuring completed,” Kelly Kraft, a Quinn spokeswoman, said in a telephone interview today. “Once the revenue comes in, it will begin to bring in more money to address our backlog.”
Illinois and other U.S. states confront deficits totaling $140 billion in the next fiscal year, according to a Dec. 16 report from the Center on Budget and Policy Priorities, a Washington research group.
“You can’t have an economy that will grow if you tax and put a burden on those who will risk their capital that will in turn create the job,” he said in a speech to the Texas Public Policy Foundation’s annual legislative conference in Austin. “It’s just that simple.”
The criticism wasn’t shared by investors, who have looked with concern at the accumulation of bills and almost $4 billion in missed payments to underfunded pensions.
That's the problem. Unfortunately, the anticipated solution is not pretty. From Dow Jones:
A New Jersey agency shrank the size of a $1.2 billion refinancing offering by roughly 40% and hiked yields on the sale as it struggled to market the bonds to institutional investors Thursday.
A term sheet with preliminary pricing for the deal showed the agency--the New Jersey Economic Development Authority--sliced the size of an originally $1.2 billion sale to roughly $712 million Thursday.
Meanwhile, the yield on the longest maturity--a $78 million tranche maturing in 2024 with a 5.25% coupon--offered a 5.37% yield. That's 39 basis points higher than the yield offered on a similar maturity on Tuesday, the first day the bonds were sold to individual investors.
The move comes as the EDA sale appeared to have mediocre demand from individual investors Tuesday and Wednesday.
Andy Pratt, spokesman for state Treasurer Andrew Sidamon-Eristoff, said individuals ordered a total of less than $300 million of the bonds on those two days.
The bonds being refinanced are school construction bonds, backed by anticipated contract payments from the state, which are subject to legislative appropriation. Despite Gov. Chris Christie's recent budget cutting, New Jersey still faces budget challenges, and its pension is still significantly underfunded, with a 62% funded ratio as of June 2009, according to Moody's Investors Service.
Time to roll out Bill Gross for another pep talk?
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It'll take a memorial service as pep rally and blue t-shirtss to get me in. ChicagoLand yowzir !
Are you guys aware that Chicago sold 36,000 of its parking meters to Abu Dhabi in 2008 for $1.15B?
Shortly after the transaction, Abu Dhabi raises parking meters fees and eliminated free parking on Sundays, holidays and festivals. A study done a year later concluded that the lost parking meter revenue to Chicago was calculated incorrectly, and Abu Dhabi bought the 36,000 meters for significantly less than their value. lol
Just another example of how America is being sold off piece by piece to fund reckless deficits.
http://www.rollingstone.com/politics/news/exclusive-excerpt-america-on-s...
I bet the Statue of Liberty would fetch quite a bit on Ebay.
You should look at Argentina...this is our destination.
And you ought to be less partisan in your presentation, as the Chicago and Illinois political ruling class is DIVERSITY and Democrap to the core. And rotten.
No shit, yellow face.
There was nothing partisan in my comment. I think your jaundice of the face is clouding your cognition.
What the fxxx, have we broken RedNeck? What happened to the ever-jolly perma-bullish ZH poster?
Corrupt governments confiscating your income can change one's outlook.
Zerohedge. It's where coolaide drunks go to die. If afghanistan had a college. We'd be it.
"Faux News" isn't partisan?
You PMSing?
Don't anger it! Do you wish to be accused of incivility? In your face partisan says disregard what your eyes tell you, listen to me do what your told typical statist.
RNR = dull tool
Well even Fox News is fawning over the second coming of the kenyan jesus. The other networks have made him into Jesus, Gaia, MLK, JFK, Mother Theresa, Budda, Mohammed (not a stretch there), Einstein, Vishnu, and Lincoln.
He heals the sick during funeral nurnberg rallies. I dumped TV after he was elected in the bankster's 2008 late summer Soros crash coup. Every channel now bows to the diety like the USSR did to Stalin.
You should look at Venezuela . . . this is our destination, duly elected dictator and all.
I see nothing new here. Infrastructures have always been better at generating profits when funded by someone else.
Infrastructure funded by public money and later sold to private interests at a discount is nothing new.
Besides, in the US, the ambiant idea is that tyranny is much acceptable if it performs on private basis than on public basis.
I noticed the new owner of the park raised fees and stuff. US citizens would not have born it if done by a public owner. So the public could not have reached the same gross as a private owner.
Infrastructures have always been better at generating profits when funded by someone else.
I believe the original intention of having the parking meters was to raise sustainable public funds. Now the parking meter funds go to a non-public recipient. Well, it's no surprise to me; Chicago is one of the most corrupt cities on earth. Did you see what emperor Daley did to Meigs Field? He could have ended up killing people directly with that move. It also cost the taxpayers millions in fines from the FAA, yet the plebs in Chicago give not a shit.
Most of are aware that corrupt liberal union states will keep looting taxpayers and the state until the money is gone and everything that can be sold - is sold. Illinois is a lot like Zimbabwe and Mugabe 2 hussein came from Chicago. Hope & Change. No one in their right mind will by shit Illinois bonds. The Feds will or some investment banks using Fed money.
Interest was supposed to help fund annual budget. Instead Daley used all of it to close one years budget gap. Guess which banksters structured this innovation?
YOWZA!
My guess is on whoever hired Daley after that
How did Daley end up with $7.7 million in The JP Morgue stock?
Shhh...no ones supposed to know about that.
more of the obama recovery. wheres ben to tout this improvement
Ben's shredding the confetti
I love that on ZH the trolls have their own trolls...
I thought your net access was blocked by the boss
Mom put a net monitor on the basement computer - I get an hour a day to post and read. 51 minutes to go...
Lol. Unjunk.
He's on CNBC - Tyler should have a clip later. 3-4% GDP per uncle ben ....
With real inflation over 12% it's kind of a disappointment. I expected a 9 to 10% growth.
Too bad Harry's housewares (read: dildo) business is not located there. Record Q4 revenues - think of all the sales and business taxes it would generate for IL!
They passed a 66% income tax increase in the dead of the night, before the new legislature was seated, with no spending cuts (only a freeze). Yea, that's good governance... /s
IL now has highest corporate tax rate in the world (except for Venezula)
They told us the lotto & highway toll tax would pay for everything, schools ect, ect, ect, ...
Clearly Illinois needs a POLL tax as well then...
You mean local sales tax on Apple products alone will not solve their deficit...Harry please talk with Steve to ratchet up the product lineup so consumers can charge up more debt and thus more sales tax.
And they sold their parking meters for some quick cash...what happened to that?
The looting is nearly complete...
The parking meters ? The billion plus is gone I think .. ?
Daley tried selling midway airport before the crash ...
True story, I ran into jesse jackass jr. and asked him about the credit bubble in late 06' he looked me in the eye and turned around and left the room, never said a word ....
Daley tried selling midway airport before the crash ...
Before or after he bulldozed it?
That was meigs field on the water ( private planes ). He blowtorched that place.
http://abclocal.go.com/wls/gallery?section=news/local&id=7821158&photo=1
obviously, he had some Olympic committee and bigwig property developers that wanted that land for cheap
The story around the pilot campfire is that his wife didn't like the airport so close to her lake shore drive condo.
Right, I misread that and thought you meant Meigs. Who was he supposed to sell midway to?
I grew up in the northern suburbs of Chicago and while I miss some aspects I certainly do not miss the weather nor additional taxes.
I live in cook. The taxes would make attila the hun blush' ...
I hear a pack of cigs costs almost $10 there...if that is not enough to make someone stop smoking I do not know what else would achieve that objective short of coughing up a lung.
Its brutal. I think its $8.50 - (cigs) you sound like my pops !!!
They add a buck a year in tax , lol'''
I'm from Dupage. I love the skyline and city life but hate Crook County's taxes, politics, and unwarranted self importance.
Harry sells dildos? I thought he just was one?
Not a mutually exclusive proposition.
News to me as well. I thought he sold used condoms.
I always here about how states have to have balanced budgets....isn't this NOT a balanced budget?
Oh, I forgot, rules/laws are only for the little people.
This news gives me the heebie jeebies*.
*If "heebie jeebies" happens to represent some obscure religious slander, I do not apologise.
i agree, are we allowed to say the this market is now completely freaking us out?
the stock market skyrocketing. muni bonds about to die a very painful death...JPM trying to destroy gold/silver to keep the myth of "no inflation" ... and their own balance sheet alive....
bonds...ick.
central planning about implode....
complete freak out.
is it possible the Auzzies are dumping positions to raise cash for infastructure rebuild ?
Yeah, they clearly need more dirtroads.
Ya but since those are constructed by 3 range rovers with 4 spare tires each it's not that much money.
"read invoices that the state has been unable to pay so far due to what technically should be classified as a liquidity crunch"
I'm gonna send that in lieu of a check to the credit card companies this billing cycle. It ain't that I don't wanna pay, but I'm having a liquidity crunch. If you would loan me a bil or to today, I should surely pay you back next thursday...
Does anybody know who has/is/will buy these types of muni bonds?
Any entity that privatizes its gains and socializes its losses. See TBTF.
His name is Ben Bernanke and he will buy them. Ben will buy anything that is worthless, could be Zsa Zsa's used tampon...if it's worth not a fucking thing Ben will buy it.
You know, it's bad enough to borrow from the future to pay today's bills. You know you're totally hosed when you have to borrow from tomorrow to pay yesterday's bills as well.
Anyone damn fool enough to buy these piles or rotting turd thoroughly deserve the epic screwing they will almost certainly get.
Shill Gross will prolly buy, so guess who gets to be the sucker? (If you got a mirror handy, it'll help answer the question).
You know you're totally hosed when you have to borrow from tomorrow to pay yesterday's bills as well.
+1 LOL About time this party got started... I've been waiting a looong time.
+1 (and whatever ZH captcha pisses you off the most)
States rights seem like a soon to be extinct commodity.
Overt or covert control, matters not, what if the con-con is called?
"I live in FEMA District 9"
Yikes, sounds awful.
ORI
http://aadivaahan.wordpress.com/2010/06/30/snake-eyes/
Illinois rattling its change cup while the Thief in Chief babbles about solid signs of improvement. What a farce.
There will be no bailout of states. Ben said so. A man in his position could never tell a lie.
"We will not monetize the debt."
I'm actually of the opinion that there won't be a QE 3.
But there will be a QE 2.1, 2.2, ...........
I'll buy one. Ah, maybe not. I'll pass. Good luck "Land-o-Lincoln"
Oh oh...I think the market just heard you, Tyler. The back door of the Roach Motel [SPY] is starting to show some activity. Someone get the bug spray 'cause the bartender there may have switched the sign to "cash".
The world's largest silver manipulator has had sellers all over it...all day...despite the curious levitation.
L. Blankfein Wildest Dreams Park [oil futures] is acting very peculiar, especially considering how well Blankfein's gang has, how does Spalding say it, Monkey hammered our dollar.
As well, the world's largest maker of zombies just twitched. And everyone knows it is never a case of just one zombie moving...but invariably hundreds of them.
HUGE sell program rolling through crap banking stocks. Shocker!
Has Illinois blown up yet?
Ben Shalom Bukkake won't buy Muni as there are ZERO members/banks who are private owners of the Federal Reserve that need these Muni bonds purchased. In other words, No Fed bankster needs rescuing due to Muni problem, thus no Fed bailout.
Rescuing muni bonds has ZERO benefit to central banksters so they never will.
Exactly Dog. Banksters are into CENTRAL power...not mickey mouse state power. All of the states could burst into flames for all Ben Bernanke cares. He lives to hoist the Federal government into its throne.
A lot of carnage will soon befall those who ASSUME the FED bails out everything and everyone...but they have absolutely no interest in bailing out munis, those state bond holders are sunk! TBTF central banksters are the only concern!
I just had a thought.. imagine the state's own pensions have to step in and save the day.. but then in order to get paid back they have to start thinking a bout cutting their own arm off hmmm
"Rescuing muni bonds has ZERO benefit to central banksters"
-- All those interest rates swaps and other derivative junk they sucked the munis into--who do you think the counterparties are on that?
Even if the TBTF are in that scheme, they have already shown that those will be insured (AIG) and that taxpayers will be paying regardless.
Even if they find buyers for the bonds, it won't fix anything. FUBAR!
It is pretty clear to me that Ben and Tim need a new crisis to do QE2 and QE3 and whatever else he wants to do. Then he can transfer even more wealth. This fits the bill.
Greece on the Great Lakes. Just default already.
They're going to float bonds to pay off old bills. That's genius, this guy should work on Wall St.
That the other side of the process referred to as securitization.
I'm seriously considering pulling a Harry-Wanger here by buying some HYD (High-Yield Muni ETF). It's yielding a tax-equivalent of about 9%
QE3 is almost a definite at this point. They don't want the pitchforks or any more Arizona-style shootings.
The problem with this might be that muni debt is not widely held by TBTF banking interests. Even if there is a "bailout" it doesn't mean, "mom and pop" bondholder are necessarily going to benefit by it.
Wouldn't it be funny if the government let retail muni bond buyers take 80% haircuts while lecturing them on personal responsibility?
So it's doing about 3 percent less than inflation. Sounds great.
Ben will have the PDs buying the muni debt. They are the arm of the true of the Fed. They will buy all the debt, all the equities and then all your public transportation systems and when they own everything change all the rules and laws.
Bought and purchased with the labors of their own slaves all while they produced nothing of value for decades but luring people into unpayable debt.
this is the deflation portion of the debtmoney racket.
This is the same shit that has transpired in nearly every South American nation. In fact, diversity policy has stuffed every government full of complete incompetent idiots who are easy marks for bankster scams and they sell their sovereigns out for change. At the top are the big whale crooks like the Daleys and the rest of the Chicago machine.
Most of South America is rented to South Americans by foreign corporations. Brazil and Venezuela are both on a fine line as far as playing ball versus getting financially attacked. The major powers control what money IS.
Another Green Chute for the market to ramp higher yet. Keep them coming, because the worse the news gets (green chutes) the higher the market goes. They are going to have to rewrite the investment books oh how to trade these tactis.
So, to pay off $6 billion in back debts, they need to borrow $8.75 billion?
this is another facet of debt monetization
only asshats will buy this stuff; number 1 being public employee pension funds So they are essentially printing their own debt papers to keep their outsized benefits accruing for the near term
and they (Public Financial engineers) will also be on the wrong side of derivative trades with the Boyz, in order to book income/cash flow just like AIG and other fucktards did
they are tossing around grenades, pretending they are birthday cakes.
What a bunch of fraudsters!
it.is.over.
States can no longer accrue more debt cheaply.
Illinois and all the other diversity-infested States are finished. Fucking borrow $8B to pay $6B in owed monies...what the fuck. Seriously. Couple that with the criminal mayor selling off the public infrastructure, he's now Chief of Staff at the WH, no? Or was that a different criminal from that crime syndicate?
The Fed will have to print money for this; we're seeing a situation no different from that in the Eurozone. The ECB doesn't want to bail out sovereigns, it wants austerity. So does the Fed. It stands with checkbook ready for the Federal power, but not for the States who are actually supposed to be the sovereigns in this U-S-A thing.
Your last part is key.
Whereas the ECB/IMF combo can impose austerity in return for more debt (amazing) applied to Ireland, the Fed can't waltz into Illinois and dictate the state budget. The Fed has no staff for such a thing (the ECB had the IMF staff) to perform such calculations.
I think Ben meant it. He won't buy munis. Neither will the Congress.
When the cops get defunded, we're gonna see some bonfires this year.
I think this is fair to say.
150 years in the making, time to revisit the 14th Amendment. The Federal gov't isn't supposed to BE this. The vast majority of sovereignty was supposed to remain in State hands.
The plan seems to be to control ALL levers of power using whatever means necessary. Certainly Congress and the Presidency have acted that way with Commerce Clause and EO mania.
At some point, this is probably the populist angle that breaks the camel. In reality, this IS the United STATES. The Federal power is this incorporeal animal and the States will eventually apply the political leverage inherent in the system to get a bailout.
Ben may not wish to buy munis, but at some point this federal money orgy while the nation starves won't sit well.
"Couple that with the criminal mayor selling off the public infrastructure, he's now Chief of Staff at the WH, no? Or was that a different criminal from that crime syndicate?"
William Daley is the new Chief of Staff. He was Commerce Secretary under Clinton and he is Richard Daley's brother. One big happy Chicago Family!!
I agree that this state is screwed up beyond repair. Republicans and Democrats have run this state into the ground. I don't see a way out of this mess. It is absolutely time to seriously consider relocating to another state.
Fucking unbelievable that the state of Illinois, as well as California, and New Jersey have become dead beats. One can only comprehend how much money is collected just from sales tax alone in any state, that such greed can lead to their own demise. How does the market now levitate at 2 year highs with news such as this is beyond me, and again all I can say is fucking unbelievable.
"MUNI DEATH RATTLE" -- Coming soon, to a theatre near you...
Not one of you has posited the INTEREST RATE effect. Turns their borrowing into 2x, 3x by the time its "paid" back or refinanced at 4x. Think Ireland here, folks.
The Benbernanke has only 1 positive attribute, and that is low interest rates. Nobody else can even have a hope of payback.
Baby boomer mentality.. just borrow it. A joke. 16-25 year olds won't have it..sorry.
The next state of the union address shall be interesting indeed. Today, as we enter a nation of debt star slavery, we will work together to get out of this mess we are in. Remember, we sold out your childrens' children livelihood into slavery as well. So with that, it will be 3 generations from now that we may have a chance of being debt free once again, like our fore fathers first talked about at the beginning of this country. So in the year 2200, we have as our goal to be free at last once again. That is only if you slaves agree to work for free 16 hours a day for the better of your descendants because we fucking partied and blew all that stinking cash maings.
You forgot. We will not be presenting you with a working solution to fix this because it's a fraudulant system without a solution. So until then we will soldier on in the dark trying destined to fail.
He will have teleprompters...and speak of all the new programs he is going to do to save the economy..create jobs....and what is his new line.....together we thrive.....its more like together I get the hives....what he should do to save what little of his name he has left....is resign...appoligize ..say I was way in over my head...and pray a new leader can come in and lead....lead us out of this mess...a Christie comes to mind..
How about cutting the budget and stop offering such outrageous pension benefits?
You mean like these?
http://www.dailyherald.com/article/20110110/news/701119867/
or have the state's own pension support/fund the market and there by giving them an interest in seeing that they one day get paid back on their investment
check's in the mail, we will not monetize the debt, i swear i will not come in your month!... the classic blunders...
...i will show you my troll if you show me yours...
BAB's still better than straight muni's, but as muni's lose all bid, people will sell BAB's, as BAB's lose the bid, the next wave is IG corporates. That might still be a ways off, but can happen far quicker than most people realize. The liquidity in corps is always one way, and relative to the size of the market, its all driven by the marginal flows, and with a lot of banks still waiting for bonus numbers, their risk appetite will not be high. On the other hand, everyone will BTFD and all will be good by end of day :(
This is just the very, very beginning of the state default fiasco. Remember when Greece was having trouble raising money as well and had to up their interest rates? That was a long time ago, and the EU theater is still in play today thanks to bailouts. We haven't even had the first state bailout yet. It is probably within a few months at this rate but like the EU debt crisis it will probably play out over a year at least.
As the situation intensifies the USD will probably get weaker (just as the Euro did), when the bailout comes then the USD will temporarily strengthen.
The fact that it is going to play out concurrently with the EU debt crisis makes trading it very tricky though.
States can't print money, but this is different how?
Duplicate
On the good side, if they get started now, the states will be waaaayyy ahead of the feds in correcting their structural issues and will be better off for it.
Unpaid bills piling up one after another, hmmm, sounds like exactly the same as in Spain.
If you bundle them and ty them down hard with a rope, you get yourself a perfect functional doorstop.
The ECB/IMF can DICTATE austerity.
That's the difference. The Fed can't come into a state and dictate its budget. The Fed has no staff to analyse state budgets. They also fear losing their independence charter and have Congress wipe them out.
Ben won't buy munis. He meant it when he said it.
At first I was thinking "I'm going to write down 200 examples to prove the difference" but it's Hell Boy 2 on tv so maybe for another time.
Sure they can.
The ECB has no sovereign authority to force austerity. They can only do so if you remain in the euro system. The FRN is the law of the land so States are in more of a pickle in terms of needing them to repay their debts. If you want FRNs, you will have to play ball. If the State cannot borrow at a low rate, then how is this not letting austerity be dictated?
The problem is that the debts are totally unpayable. The system must collapse on itself. If the States attempt to balance higher taxes with this "we won't work" union service coupled with massive salaries and pensions, all hell will eventually break loose.
In the face of this, the Fed is pretty much going to have to bid EVERY FRN debt-based instrument...everywhere. They're ALL structurally flawed in that the FRN system requires growth to satisfy today's claims.
In other words, no vendors are allowing Illinois to charge more services until the current bills are paid. Good!
My other comment is what kind of idiot, besides The Bernank, would actually buy this debt?
10-year AAA muni yields rose 5bps, a second ugly day in a row.
Who is going to buy IL's shit bonds?
The Ben Bernank?
The banksters?
The IL Pension fund/union cookie jar?
QE3 or 4 or 5?
Don't forget the sales and delivery tax. !11% !
I live in Chicago and it has truly become an adversarial town. They won't even let the kids throw a party. And Daley only gave a short notice about not running again so there could be no grass roots candidate.
Sanctuary city, county, etc....
Sad.
God bless Diversity
Ya but look on the bright side. You're the only city that's like 300 feet from a bajillion gallons of water that has ever almost burned entirely to the ground.
...And such good water it is:
http://www.foxriverwatch.com/wisconsin_lake_michigan_PCBs_PCB.html
Nobody has mentioned the muni derivatives bomb--swaps. Banksters do indeed have plenty of exposure to muni credit in the form of inappropriate arcane derivatives -- see Jeffersom County, Harrisburg, most airports. A muni collapse will make the whole stinking spiderweb jump.
"The size of the municipal CDS market is about $50 billion, making it relatively tiny compared with the size of the overall municipal-bond market, which is $2.8 trillion".
From WSJ:
http://online.wsj.com/article/SB10001424052748704862604576029722777299778.html
Actually the US will start off as Argentina at first and it will get worse. For the simple fact that their economy was more socialists than ours which was every man/woman for themselves. When those checks stop coming in and/or they don't buy nearly what you need, people will go insane.
No need to worry about CHI TOWN at least. RAHM EMANUEL will get them straightened out. Haaaaa!!