CHICAGO - The Illinois Development Finance Authority's board of directors yesterday authorized the issuance of up to $10.1 million of bonds to help a Chicago suburb restructure some of its outstanding debt and head off a possible default on $900,000 of that debt.

Ron Bean, the authority's executive director, said the bond issue for Maywood will refund $7.7 million of outstanding debt and give the cash-strapped-town $2.3 million of new money. He said the board will meet in December to approve final documents for the transaction, adding that the bonds would probably be sold in January in a deal underwritten by George K. Baum & Co.

Bean said it was best to address Maywood's financial problems immediately, instead of "waiting for five years from now to have the state asked to take more drastic action." Under the state's 1990 Distressed Cities Act, Illinois can bail out cities in the highest bracket of tax rates and the lowest per capita tax yields.

Although Maywood does not meet those tax criteria, the town and public finance officials approached the authority about issuing the bonds after efforts to issue bonds on their own failed and negative publicity about the town rendered any new debt offering unmarketable. The issue will mark the first time the authority has stepped in to help a municipality that does not meet the state's definition of a distressed city.

Bean said the issue will include the refunding of $900,000 of general obligation bonds on which Maywood was close to defaulting. Maywood sold the bonds, which had been scheduled to mature Dec. 1, to Harris Bank last year. However, the bank last week agreed to purchase a new Maywood bond issue that will extend the maturity to November 1993 and give the authority time to sell the larger refunding and new money issue for Maywood, according to Bill Morris, a senior vice president at George K. Baum.

John Repsholdt, a vice president and director of public finance at Harris, said yesterday the bank is waiting to receive from Maywood a certified copy of the ordinance authorizing the bonds before the bank can sign the purchase agreement. He declined to comment on the terms of the new bond agreement until the deal is finalized.

Len Chabala, Maywood's interim village manager, said the Maywood Village Board approved the ordinance at its meeting Monday.

Proceeds from the authority's issue will be used to pay off the new bonds held by Harris, according to Bean.

Maywood, which is located about 11 miles west of Chicago, had attempted to put together a refunding and new-money issue earlier this year, partly to pay off the $900,000 of bonds and avoid a default. But problems with the fiscal 1991 audit as well as a turnover in public finance firms and the village manager position resulted in the refunding being killed.

Subsequent news stories about the town facing a default on the bonds held by Harris Bank and the presence of a federal investigation into Maywood's financial dealings also hampered attempts to put together a deal, according to Morris.

To get the authority to issue the 15-year bonds, Maywood agreed to provide security for the debt and improve its finances, which have been running a deficit of nearly $1 million over the last two years. The bonds will be secured through an intercept mechanism that will allow the authority access to the approximately $4 million a year Maywood receives in state aid. The money will be used to provide two times debt service coverage on the authority's issue and payments on any other outstanding town debt.

The issue will also restructure the town's annual debt service payments, lowering them by at least $100,000, to $1.3 million. according to A.G. Ansant, the authority's director of research. She said the anticipated addition of a credit enhancement to the issue should lower the annual debt service even more.

In other action, the authority board also approved the issuance of up to $50 million of tax-exempt commercial paper that will be backed by pooled state Medicaid receivables held by pharmacies.

Through the program, pharmacies will be able more quickly to access money owed to them by the state of Illinois, which has been 90 days late or more in paying its bills to Medicaid providers. The authority will pool bills held by pharmacies certified as payable by the state and use the state's obligation to pay those bills as security for the issue.

Colleen Murphy, the authority's senior program administrator, said the deal will have a liquidity line provided by Canadian Imperial Bank of Commerce to cover any problem with remarketing the paper. She added that the authority will use $3 million of its own funds as an interest reserve backup to the liquidity line, should it be drawn upon.

Murphy said the authority will begin signing up pharmacies for the program and will begin issuing the paper in $1 million to $20 million increments starting in January. She added that Goldman, Sachs & Co. will be the program's commercial paper dealer.

The program is similar to a commercial paper program undertaken by the Illinois Health Facilities Authority earlier this year for hospitals and nursing homes. That program was done on a taxable basis, however, while the development finance authority's program will be tax-exempt.

Bond attorneys involved in the new deal have explained the reason for the tax difference by pointing out that the development authority will buy the receivables from the mostly for-profit pharmacies without any element of recourse against the participants. Under the health facilities authority program, participants were required to repurchase the receivables if the state had not paid them by a particular date.

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