The Illinois Power Co. earlier this month, successfully completed the market's second bond repurchase and refinancing deal to use a modified dutch auction tender technique, according to the manager of the deal, Bear, Stearns & Co.
Under the dutch auction technique, holders of the utility's outstanding bonds -- which cannot be advance refunded because of tax law restrictions -- were asked to submit bids reflecting a price at which they would be willing to sell the security back to the company.
Illionois Power then had the option of accepting or rejecting any bid. But all bidders that submitted prices at or below the level picked by the company received that price for their bonds.
About 170 bondholders responded to the Illinois Power tender offer, submitting $144 million in bids, according to Joseph S. Fichera, an associate director of corporate finance at Bear Stearns.
That represents about 45% of the outstanding debt, which was sold in three series between 1983 and 1985 and carried coupons as high as 11 3/8%.
The company chose to accept offers representing about $84 million of the debt, and refinanced that amount with new 30-year bonds priced at 7 3/8%.
Mr. Fichera said that interest rate will generate about $79 million in interest cost savings over the life of the bonds.
In March, Southern California Edison Co. became the first municipal issuer to use a dutch auction. And Smith Barney, Harris Upham & Co. is expected to handle a similar deal later this year for Oglethorpe Power Corp. in Atlanta, according to utility officials.
A group of seven governmental units in Cicero, Ill., is considering jointly backing a bond issue to build a public school that would have public library, recreation, and vocational training facilities.
The adviser to the governments, Donald Kane, a principal of Kane, McKenna & Associates Inc., said that if the concept is deemed feasible, it would be a rare example of intergovernmental cooperation to finance a public building.
"With seven different governments, seven different elected boards, it was not automatic that this idea could even be explored," Mr. Kane said. "It has taken significant leadership on the part of Cicero officials to take this first step."
The governments -- an elementary school district, a high school district, a community college district, two park districts, a library district, and a town government -- signed an agreement last week in which they agreed to jointly fund a $186,000 study to determine the feasibility of financing a multiuse facility.
The complex would cost as much as $20 million, Mr. Kane said.
A public fiance source familiar with the idea said questions that need to be resolved include how much each government would pledge for debt service, which government would hold title to the facility, and whether any state laws prohibit such an arrangement.
Dennis Both, Cicero town attorney, said the motivation behind the concept was to spread the costs of building and operating a new facility among all the governments and to keep as much as possible of the burden off residential property taxpayers.
He explained, for example, that the town of Cicero would use revenues from its tax increment financing district to fund its share of the project, while the library, community college, and park districts could pledge user fees to fund their portions.
The school districts still would need the approval of voters in a referendum to participate in a bond issue, and their shares of revenues to back bonds would come from property tax collections, said Tony Scariano, superintendent of the Cicero elementary school district.
"Everybody is trying to do what's best for the residents and the town as a whole," Mr. Both said.