CHICAGO - The Metropolitan Pier and Exposition Authority in Chicago will proceed later this month with a debt refunding and new-money issue that has been downsized to $240 million, according to authority officials and underwriters.
In March, the authority's board approved a refunding issue of about $490 million, but higher interest rates since that time forced the refunding down to around $175 million.
The higher rats have erased any savings the authority had hoped to gain from refunding the bonds that are part of its $869 million 1992 revenue bond issue to finance the expansion of the McCormick Place convention center in Chicago.
J. Ray Kljajic, a managing director at Smith barney Shearson, the book-runner for the upcoming issue, said there will be no economic savings from the refunding. Instead, the deal will restructure debt service on the old bonds to make room for the $65 million of new bonds that will also be sold.
Proceeds from the sale of the new-money portion will fund further improvements at McCormick Place and Navy Pier, another Chicago facility run by the authority, according to Linda Riley Mitchell, the authority's chief financial officer.
Mitchell said the authority will go to market with the issue sometime during the week of May 23.
A preliminary structure for the issue calls the zero coupon bonds, deferred interest bonds, current coupon terms, and serials.
In addition, according to Kljajic, there is a possibility that Smith Barney's version of inverse floaters, called Auction Inverse Rate Securities, or AIRS, will be included in the sale.
"It's a veritable smorgasbord," Mitchell said.
Kljajic said that "essentially the whole deal" will carry insurance from Municipal Bond Investors Assurance Corp. and Financial Guaranty Insurance Co.
Parts of the 1992 bond issue are insured by FGIC and by AMBAC Indemnity Corp. About $621 million of the unenhanced 1992 debt was rated A-plus by both Standard & Poor's Corp. and Fitch Investors Service and A by Moody's Investors Service.
Mitchell said the underwriting team for the bond issue will be made up "substantially" of the same firms that were in the 1992 deal. Smith Barney was the lead manager on that deal; Donaldson, Lufkin & Jenrette Securities Corp. was the co-senior manager; and there were 23 co-managers, including several minority-owned and woman-owned firms.
The authority's 1992 deal is still the largest single bond issue ever sold in Illinois.
The 1992 bonds are backed with revenues from a special package of taxes passed by the Illinois General Assembly in 1991. The bonds are also secured by a set amount of annual state sales tax revenues. If revenues from the tax package were to fall short of debt service, then state sales tax revenues, subject to annual appropriation by the legislature, would be used to plug the gap.