Foreigners help Ill. sell $900M in bonds

July 14, 2010 at 7:33 PM
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NEW YORK, July 14 (UPI) -- Foreign investors helped Illinois sell $900 million in taxable bonds Wednesday, despite the state's fiscal woes and weak tax revenue, a U.S. banker said.

The bonds, issued under the Build America Bonds program, which carries higher-than-usual interest rates subsidized by the federal government and special tax credits, were priced at 3.25 percentage points above the benchmark 30-year Treasury bond.

They're due in 2035. The bond money will be used to improve roads, bridges and schools, Illinois officials said.

Non-U.S. investors bought more than a quarter of the issue, Citigroup Inc.'s U.S. municipal strategy director, Patrick Brett, told Dow Jones Newswires.

"If someone is a non-U.S. investor, and they are thinking Greece versus the state of Illinois, they might want Illinois," Richard Saperstein, HighTower Securities LLC's Treasury Partners managing director, told the news service.

Illinois faces about $9 million a year in higher-interest costs than it would if the state were in better financial shape, the Chicago Tribune reported. The extra costs would total about $225 million over the life of the bonds.

Moody's Investors Service and Fitch Ratings both downgraded Illinois' debt rating a notch last month. Moody's downgrade tied Illinois with California as the agency's worst-rated state, the Tribune said.

Illinois remains a notch above California in ratings by the Fitch and Standard & Poor's credit ratings services.

The state could have as much as $6 billion in unpaid bills, Illinois Comptroller Daniel Hyne told CNN.

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