Transaction Summary
RBCCM worked closely with the City of Chicago (City) to develop and execute its 2023 Plan of Finance related to the General Obligation and Sales Tax Securitization Corporation (STSC) credits. RBCCM executed the Plan of Finance serving the City in the following ways:
- Joint bookrunning senior manager on $523.8 million General Obligation Series 2023AB Bonds
- Joint bookrunning senior manager for $159.9 million Sales Tax Securitization Corporation Senior Lien (Social Bonds)
- Joint bookrunning senior manager for $580.6 million Sales Tax Securitization Corporation Senior Lien Series 2023C and Second Lien Refunding Bonds Series 2023AB
- Joint Dealer Manager for $2.9 billion tender for the City of Chicago that generated over 21% participation rate or $640 million tendered par
- Joint bookrunning senior manager for $219.085 million Sales Tax Securitization Corporation Refunding Series 2023D (Forward Delivery) and Second Lien Refunding Bonds Series 2023C (Forward Delivery)
Summary of Terms
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Size and Offering: |
$523,800,000 |
$740,456,000 |
$219,085,000 |
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Issuer: |
City of Chicago |
Sales Tax Securitization Corporation |
Sales Tax Securitization Corporation |
|
Security: |
General Obligation |
Sales Tax Securitization Receipts |
Sales Tax Securitization Receipts |
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Credit Ratings: |
Baa3 / BBB+ / BBB / A |
First Lien: NR / AA- / AA / AAA |
First Lien: NR / AA- / AA / AAA |
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Pricing Date: |
December 8, 2022 |
January 19, 2023 |
May 2, 2023 |
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Closing Date: |
January 9, 2023 |
February 2, 2023 |
October 4, 2023 |
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Purpose: |
A portion of the proceeds is being used to fund: (i) certain projects that are part of the Chicago Works program, (ii) certain projects that are part of the Chicago Recovery Plan, (iii) capitalized interest for certain series of bonds, and (iv) costs of issuance of the bonds. |
A portion of the proceeds is being used to fund: (i) a portion of the Chicago Recovery Plan, (ii) repurchase through a tender of certain City of Chicago General Obligation Bonds, (iii) capitalized interest for certain series of bonds, and (iv) costs of issuance of the bonds. |
A portion of the proceeds of the Bonds will be used to: (i) refinance outstanding advances on an existing line of credit agreement (ii) refund all or a portion of the outstanding City’s Series 2014A GO Bonds; and (iii) pay the costs of issuance. |
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Tax Status: |
Federal: Tax-exempt; State: Taxable |
Federal tax status varies by series; |
Federal: Tax-exempt; State: Taxable |
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Optional Call: |
Certain bonds are callable 1/1/2030, while other bonds are callable 1/1/2032 |
Certain bonds are callable 1/1/2030, while other bonds are callable 1/1/2033 |
1/1/2033 |
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RBC CM Role: |
Bookrunning Senior Manager |
Joint-bookrunning Senior Manager; Joint Dealer Manager on Tender |
Bookrunning Senior Manager |
Issuer Overview
With a population of 2.7 million, the City of Chicago is the third largest city in the United States and the regional hub of the Midwest. The City has several credits to fund its capital programs, including the General Obligation program (GO) and STSC, in addition to each of the enterprise credits of the City (O’Hare Airport, Midway Airport, Water System, and Wastewater System).
Plan of Finance
On December 8, 2022, RBCCM served as bookrunning senior manager for $523.8 million City of Chicago General Obligation Bonds, Series 2023AB. The proceeds from the bonds are being used towards funding the City’s Chicago Works capital plan and Chicago Recovery Plan. This offering was the City’s first bond issue after receiving rating upgrades and/or outlook improvements from each of the four rating agencies in the fall of 2022.
The bonds were structured with $100 million of bonds being callable in 7 years and nearly $420 million with a 9-year call. Ultimately, the City’s General Obligation Bond sale generated significant subscription from more than 50 participating investors, including many that were not prior holders of the City’s GO Bonds. This strength in demand allowed for attractive spreads.
Shortly thereafter, on January 19, 2023, RBCCM served as joint bookrunner for the $740.5 million Sales Tax Securitization Corporation (a bankruptcy remote SPE of the City of Chicago) Series 2023 bonds and joint dealer manager on the tender transaction.
The Social Bonds, the first sold by the City, were marketed to individual retail investors, particularly in the City of Chicago. The Social Bonds received $176.28 million of retail orders.
Concurrently with the sale of the Social Bonds, the Corporation sold three series of bonds to fund a tender for outstanding City of Chicago General Obligation bonds. Ultimately, approximately $555 million of bonds were accepted to be tendered, indicative of a 21% participation rate. To fund the tender, the Corporation sold $75 million senior lien tax-exempt bonds (of which $37 million were used for the tender and the remainder for a refunding), $142.1 million second lien tax-exempt bonds, and $363.5 million second lien taxable bonds.
In May, the City completed the Plan of Finance with a $219.085 million Forward Refunding of a portion of the City’s Series 2014 GO Bonds and line of credit advance (which itself refunded certain of the City’s 1999 Capital Appreciation Bonds). This financing was the City’s first Forward Delivery Refunding. RBCCM served as bookrunning senior manager.