Illinois Sets $1 Billion G.O. Sale in February After Pension Fix

Illinois plans to sell $1 billion of tax-exempt general obligations on Feb. 6, according to John Sinsheimer, director of capital markets for the state.

Proceeds of the negotiated sale will finance capital projects through the Illinois Jobs Now program, Sinsheimer said in a telephone interview.

The deal will be Illinois’s second since lawmakers in December broke years of political gridlock to bolster the worst-funded U.S. state pension system, intended to save $160 billion over 30 years. A subsequent sale of taxable general-obligations saved 29 percent relative to a borrowing eight months earlier, data compiled by Bloomberg show.

Illinois last year became the lowest-graded U.S. state by the three biggest rating companies, with a rank four steps above junk. It has the weakest pension funding ratio among states, at 40.4 cents on the dollar, down from almost 63 cents in 2007, Bloomberg data show.

The pension measure extended a rally in Illinois general obligations relative to top-rated municipal bonds. The extra yield investors demand to own Illinois debt instead of AAA securities is 1.56 percentage points, close to the lowest since August, Bloomberg data show.

Before it's here, it's on the Bloomberg Terminal.