Tuesday, February 09, 2016

Kicking the Can?

  • Chicago’s troubled public school system on Wednesday had to slash the size of one of the biggest "junk" bond offerings the municipal market has seen in years and agree to pay interest costs rivaling Puerto Rico’s in order to lure investors into the deal.

    The Chicago Board of Education managed to sell only $725 million of an originally planned $795.5 million of tax-exempt bonds, and yields on the deal topped out at 8.5 percent, a massive premium relative to higher-rated debt sold in the U.S. municipal bond market and a clear indication of investors’ view of the depths of the district’s fiscal woes.

    Wednesday’s sale came a week after the school system had to pull the deal in its first attempt at an offering amid worry by investors that the district could end up in bankruptcy.

    The nation's third-largest public school system has become dependent on borrowing to bolster its budget, which is sinking under escalating pension payments, despite credit ratings that have dropped into the "junk" level.

    The 8.5 percent yield for bonds due in 2044 with a 7 percent coupon was slightly below the 8.727 yield for 21-year bonds in the municipal market's last big junk bond sale - a $3.5 billion Puerto Rico issue in March 2014.
This was last week, and they couldn't even sell the complete run, which we suppose is a good thing. Selling three-quarters-of-a-billion in debt that won't be paid off for almost  30 years gives us plenty of time to flee the state and make sure our progeny are far from this ground zero.

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30 Comments:

Anonymous Anonymous said...

Spend, spend, spend.
Tax, tax, tax.
Borrow, borrow, borrow.
Spend, spend, spend.
Repeat


Don't cut spending. Don't sell off assets. Just keep spending.

2/09/2016 12:33:00 AM  
Anonymous Anonymous said...

goes to show you no one knows how to do finances and math at CPS

2/09/2016 01:28:00 AM  
Anonymous Anonymous said...

Have the teacher union invest in their own bullshit. Bet you wouldn't see much parting of their cash from purses.

2/09/2016 01:40:00 AM  
Anonymous Anonymous said...

Didn't Detroit do the same stuff before they finally admitted that they were bankrupt?

2/09/2016 02:52:00 AM  
Anonymous Anonymous said...

How many of these bonds will end up in the CPD Pension Fund?

They have great returns!
Chicago will never default.

2/09/2016 02:57:00 AM  
Blogger JohnL said...

Why would anyone with a minimum sanity level invest in these bonds?

2/09/2016 03:59:00 AM  
Anonymous Anonymous said...

The writing is on the wall. Chicago will be bankrupt with the next 2 years. Welcome to West Detroit.

2/09/2016 04:50:00 AM  
Anonymous Anonymous said...

follow the money, aka commissions:

http://chicago.suntimes.com/the-watchdogs/7/71/740413/watchdogs-cps-bond-fees

They will kick the can the whole length of Western Avenue - no bailouts in Chicago, the players are still making too much money.



2/09/2016 05:34:00 AM  
Anonymous Anonymous said...

When Paul Vallas left CPS in 2001 the budget was balanced. Also, in 1995 our pension was 90% funded. The city made 2 BILLION dollars from our 2% contributions during the 1995-2005 pension holiday (1995-2005) and 0% of the money withdrawn from our paychecks made it into the pension fund. Same with the second pension holiday. Of course the 7% pick-up went elsewhere also.

2/09/2016 05:57:00 AM  
Anonymous Anonymous said...

Hope CPD is watching this. Your pension funds could be gone too. It would be a shame to see all these retired guys trying to get some kind of job all over again.

2/09/2016 06:16:00 AM  
Anonymous Anonymous said...

This is the results of a very liberal and progressive education establishment, that is also probably corrupt.

2/09/2016 07:00:00 AM  
Blogger Mr. SouthSide said...

Junk bonds. Junk Teachers. Fits.

2/09/2016 07:07:00 AM  
Anonymous Anonymous said...

Then we have Crete monee high school head having up to 7 huge fights a day in the school look at this morons reasoning: direct from fox32 website:

CHICAGO (FOX 32 News) - Is it a high school, or a fight club? That’s the question some south suburban parents are asking after a string of brawls are captured on video.

The video was taken during altercations inside Crete Monee High School. FOX 32's Dane Placko reports parents are upset and demanding the district take control of the
It was a chaotic scene recently in a large common area called "The Circle" at Crete Monee High School, and there’s other video of a fight between two girls last week.

Photo Parents outraged after viral video shows string of suburban HS brawls
Some parents and students say it's simply out of control.

FOX 32: What's your reaction when you see those videos?

"It makes me sick to my stomach to know my child is in that school and that his life could be in danger,” said parent Roberta Abatzis.

Abatzis is one of several parents FOX 32 talked to who say administrators in district 201-U aren't doing enough to crack down on the problem.

Recently, one student edited together a series of fights that took place in the school and put it to music. The video quickly went viral and has sparked outrage on community message boards.

There's more than two, three a day,” Abatzis said.

FOX 32: Two or three fights a day?

"A day. I hear that sometimes on a good day seven,” she added.

"What we see on video you can see in any school,” said Nate Cunningham Jr.

District Superintendent Cunningham Jr. says while there have been fights, the scope of the problem is overblown partly because of social media, and partly because students make up a tiny percentage of the student body.

Cunningham Jr. says in the past, students would quickly be suspended or expelled for fighting. But the district is following a new state law that goes into effect this September which discourages suspension for fights.

"In the new day when we're expected to educate 100-percent of our children, it's our job to keep them all there and do the best job we can with them. We are only going to exclude them when there are extreme behaviors,” Cunningham Jr. said.

"I think the kids are running the school,” another parent said.

This parent, who did not want to be identified, says she's frustrated because there are so many good kids at the school who just want an education and not a fight.

"I don't think they're doing these kids any favors by allowing this kind of behavior. And I think the administration needs to get a grip on this and get things under control,” she added.

The parents FOX 32 talked to say teachers are also afraid for their safety, but the superintendent insists there is enough security to provide a safe environment and that fighting represents only ten percent of the student infractions at the school.

2/09/2016 07:39:00 AM  
Anonymous Anonymous said...

Wow! Rahm's friends made a killing on those bond fees.

2/09/2016 08:35:00 AM  
Anonymous Anonymous said...

Nobody is going to get away! This bubble is about to burst, there is no remedy, no savior; CPS is going to fail! The only question is When and what will it do to the rest of the City Government. Are the other pensions in danger of going down with this ship? Rauner knows that bankruptcy is the only answer, Madigan cannot pull the rabbit out of this hat. Add to that a Strike; 2016 is going to be an amazing year for Chicago, maybe even a Mayoral resignation. Baby"G"

2/09/2016 09:01:00 AM  
Anonymous Anonymous said...

You can see right here how it happens, like looking into the future. The schools don't have enough money to fund their waste, fraud, and abuse, in the form of pork-stuffed contracts for teachers and administrators, so rather than trim some of the excess fat, run a tight ship, do more with less, they mortgage the future, paying for today's waste with money that hasn't even been budgeted in the future. So that when that future time comes, they have to pay for everything then-current PLUS pay off the bonds PLUS the high interest. The only way bills like this get paid off (the way us working stiffs pay off our credit card debt) is for SOMEONE, SOME TIME, to do MORE WITH LESS. It's a bitter pill, when you finally realize that there isn't an infinite source of money and you have to take financial responsibility, which means DOING MORE WITH LESS...NOW _AND_ GOING FORWARD. Why, oh why is this so hard for people to grasp? This is what you get with big government and government agencies that have never had to work for money. They simply go to the taxpayer that lays the golden eggs. If these people are oblivious to reality, then they need to be held to account by the taxpayers. And if the taxpayers won't do it, then God help us all, because the last resort is an ugly one. It looks like: bread lines and wheelbarrows full of worthless cash. Watch. Just watch.

2/09/2016 09:46:00 AM  
Anonymous Anonymous said...

Shows you how much they and other institutions rely on money from the state. If you ran a business the way they do you would be fired but they keep the same morons in leadership. I say let the governor take over fire everyone and start from the beginning again. Where's the tax and lottery money going?

2/09/2016 10:26:00 AM  
Blogger MTS said...

http://www.forbes.com/sites/investor/2014/12/11/investors-just-say-no-to-illinois-nj-and-pr-muni-bonds/2/#5c1c5c887b39

This is from December 2014 but still resonates true today.

2/09/2016 10:29:00 AM  
Anonymous Anonymous said...

I bought a 20 year cd at 9 percent in the 80s and held it 20 years. The $3000 investment came to $19, 500. So if the city takes $725mil and sets it out at 8.5 percent over THIRTY years, what will your grandchildren be expected to be on the hook for?

2/09/2016 10:41:00 AM  
Anonymous Anonymous said...

Too many hands in cookie jar

2/09/2016 10:52:00 AM  
Anonymous Anonymous said...

Anonymous Anonymous said...

Hope CPD is watching this. Your pension funds could be gone too. It would be a shame to see all these retired guys trying to get some kind of job all over again.

2/09/2016 06:16:00 AM
You are correct dear Watson! What about the 60 million freely given to daley vanecko realty investments all that money poof gone and no indictments wonder why? Who got the filled manila envelopes overflowing with our cash that was destined for the hard working street coppers future!

Why does the mayor have the city treasurer on the board deciding where "our money" is spent? collusion! mike lappe great job getting all the fake injury coppers off the rolls how about looking into theft of funds via daley vaneko? who at pension board gave the money away? Come on Mike step up before you retire, any investigative real reporters?

2/09/2016 11:58:00 AM  
Anonymous Anonymous said...

To 10:41: They'll be on the hook for the original principal of $725MM because the interest is paid semi-annually and doesn't compound as your CD did. Of course, that's assuming that the CPS doesn't default on the bonds before the maturity date.

2/09/2016 12:05:00 PM  
Anonymous Anonymous said...

that is what they do never solve anything just take more money! Why on another subject is hillary not in jail?

http://www.msnbc.com/msnbc/fbi-formally-confirms-its-investigation-hillary-clintons-email-server

lets hope when trump takes over she is indicted and the people that were around her and obama get seriously looked into1

2/09/2016 12:28:00 PM  
Anonymous Anonymous said...

Ironic that I remember that when they began the lottery, way back when, the people were told that the state's schools would never want for money again.

2/09/2016 02:12:00 PM  
Anonymous Anonymous said...

lift residency after 7 yrs...its time!

2/09/2016 03:25:00 PM  
Anonymous Anonymous said...

When Paul Vallas left CPS in 2001 the budget was balanced. Also, in 1995 our pension was 90% funded. The city made 2 BILLION dollars from our 2% contributions during the 1995-2005 pension holiday (1995-2005) and 0% of the money withdrawn from our paychecks made it into the pension fund. Same with the second pension holiday. Of course the 7% pick-up went elsewhere also.

2/09/2016 03:54:00 PM  
Anonymous Anonymous said...

I am moderately surprised they got off as cheap as they did. 8.5% interest for muni bonds is basically about as bad as it can get and still sell anything. That is likely why they had trouble getting rid of all of the bonds.

It probably does not help any that the state is not in a position to help, and in fact is in much the same position, so helping CPS more is not in the cards. Keep in mind there is a huge subsidy the state already gives all local school districts in the form of the state making up pension shortfalls to the teacher retirement system. You see, the contributions from local school districts and teachers, and the income the pension plans earn, don't come close to paying for teacher retirements so the state makes up the rest. Its another one of the reasons the state is in so much trouble.

2/09/2016 04:13:00 PM  
Anonymous Anonymous said...

7:39 am
Thanks for your post but I don't think anyone here gives a shit about Crete-Monee school fights. Do you know how many are in CPS every day? Didn't think so.

2/09/2016 08:01:00 PM  
Anonymous Anonymous said...

Where can I get those bonds? 8.5 Juicy!

2/09/2016 08:45:00 PM  
Anonymous Anonymous said...

Anonymous Anonymous said...
7:39 am
Thanks for your post but I don't think anyone here gives a shit about Crete-Monee school fights. Do you know how many are in CPS every day? Didn't think so.

2/09/2016 08:01:00 PM

The point that I got out of that article and the story told on tv was that this shit continues there, in Chicago and all over the state due to the new state law where you can't suspend the mutts. You have to deal with the constant disruptions with the fights and other bullshit that the actual good students and teachers have to suffer because a minority of students now run the schools.
Is this more of the work by the black caucus in Springfield?
Your votes do count?

2/10/2016 08:48:00 AM  

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