CHICAGO SCHOOL WOES. The Chicago Public School system is in serious financial trouble:
Chicago's public school (CPS) system plans to sell a new type of bond issue in an attempt to separate the debt from the district's severe financial woes and protect it in a potential bankruptcy filing, according to a document released by the district on Tuesday.
The preliminary prospectus for the debt indicates the Chicago Board of Education will issue $500 million of bonds secured solely by a capital improvement property tax and not by the district's general obligation pledge.
That pledge currently covers about $6.8 billion of existing bonds that are rated junk by Moody's Investors Service, S&P, and Fitch Ratings.
CPS, the nation's third-largest public school system, is struggling with pension payments that will jump to about $720 million this fiscal year from $676 million in fiscal 2016, as well as drained reserves and debt dependency - factors that have pushed its GO credit ratings deep into the junk category and led investors to demand fat yields for its debt.
Illinois Governor Bruce Rauner last week vetoed a bill to give CPS a one-time $215 million state payment to help cover pension costs.